Health and Safety Fines vs. the Cost of Compliance
A recent study by Arinite shows that the cost of a health and safety fine in the UK far outweighs the expense of ensuring compliance.
All businesses are required to invest in health and safety systems and planning to some degree—but do you know the difference between your average spending on compliance and how much you could potentially be fined for negligence? New research from the health and safety consultants at Arinite provides an answer. Their study revealed that, in 2016, small- and medium-sized enterprises (SMEs) that invested in health and safety avoided a fine that would have potentially cost them £75k more than the cost of ensuring compliance.
According to the latest prosecution data from the UK’s Health and Safety Executive (HSE), businesses paid an average of £115,440 in fines when found guilty of a health and safety breach in 2016. In contrast, the cost of health and safety compliance for SMEs in 2016 ranged between £5k and £40k.
The manufacturing and construction industries typically get the largest volume of fines simply due to the nature of the work, which involves working from height, working with gas, and other dangerous activities. But the average fine in utilities and extractive industries was far higher than all other industries. As the graph below shows, while there were only 18 incidents in utility industries, the average fine was £409,729—well below the industry-wide average of £115,440.
A total of £32,438,677 worth of fines were issued in 2016 across the UK. Half of those were issued in the manufacturing industry (£16,816,673), followed by extractive and utility supply companies (£7,375,120), and then construction (£4,824,983).
This data, moreover, only shows the prosecution costs. Bear in mind that health and safety failures never only result in a fine. A major accident will also incur the total cost of injuries and ill health sustained to workers, as well as the PR costs when these offenses make national headlines (learn How to Look After You Business' Safety Reputation). The HSE estimate that the total cost of injuries and ill health from working conditions in 2014/15 was £14.1 billion, £2.8 billion of which were covered by the employer.
Why Invest in Health and Safety Compliance?
There are many reasons a business should invest in health and safety, above and beyond the cost of a breach fine. Moral duty and concern for staff, for example, are themselves strong reasons for investing in compliance (for a related discussion, see The Moral Safety Compass). Company policy and simple common sense also play a part, particularly in industries where health and safety planning is an everyday fact (as is the case in manufacturing and construction, for example).
Negative health and safety publicity is also something all companies strongly want to avoid. There have been high-profile cases in the past year in which a breach may have damaged a company’s reputation beyond repair. The Smiler roller coaster horror crash at Alton Towers theme park was the country's biggest health and safety incident of the year, costing two teenagers their legs and leaving the company with a £5 million fine.
With all these reasons in favor of health and safety compliance, why do many companies still fail to comply? Almost all major organizations are likely to have a written health and safety policy, an accident reporting system, and a designated health and safety role or person (see How Many Safety Pros Do You Need to Hire? to find out whether you are adequately staffed). Most accidents are entirely avoidable, and while investment is a factor in preventing them, simple communication between employees and fostering a culture of safety are the most effective ways to save lives in the workplace.
Tips for Avoiding a Heavy Health and Safety Fine
It can be tough to judge exactly how compliant one is as a company. Helpfully, the Institution of Occupational Safety and Health (IOSH) has provided specific advice on how businesses can prevent and reduce the cost of a fine.
They note that the main factors increasing the seriousness of an offense include:
- Cost-cutting at the expense of safety
- Deliberate concealment of illegal activity
- Breaching a court order
- Obstruction of justice
- A poor health and safety record
They also outline a series of factors that could help reduce the seriousness of the offense and, as a result, reduce the heft of the fine:
- Effective health and safety procedures in place
- Evidence of steps taken voluntarily to remedy a problem
- A high level of cooperation with the investigation
- A good health and safety record, without previous convictions
In 2017, it might be worth reviewing your organization's safety practices and ensuring compliance above and beyond the standard set in previous years. While health and safety breach fines continue to dog a number of companies, the cost of compliance has remained relatively low, making it the obvious choice.