For employers, implementing health and safety initiatives can be really costly, and when these regulatory standards aren’t adhered to properly it can contribute towards some crippling developments as far as the internal economics of a business.
The associated costs can be categorised into two sets, namely ‘human costs’ and ‘financial costs’.
Human costs deal with the financial impact an illness or injury has on an individual, whereas financial costs concern the business and its subsequent costs as a result of an employee’s illness or injury.
In the UK, estimates suggest that annually between 2015 and 2016, 622,000 workers suffered injuries at work, and 528,000 workers suffered a new case of ill health which they attribute to their working conditions. If this trend continues rising annually, then the financial costs to businesses could be a real cause for concern.
Together with Nifty Lifts, suppliers of access platforms to workplaces that implement stringent health and safety procedures, we run through the costs of health and safety mishaps, so too the measures businesses put in place to avoid them in the future to help save money.
Saving money on absence costs
The likelihood of employees needing to take sick leave can be reduced by the proper implementation of health and safety standards and procedures. This would also help in the reduction of both the ‘direct’ and ‘indirect’ incurred financial costs to a business.
If a business encourages good health and safety practices in the workplace, direct costs could be reduced in the following areas:
- Paying of absent employee salaries.
- The overtime costs incurred when available employees need to cover the work of an absent employee.
- Additional losses to profits due to the loss of output incurred by absent employees.
In addition to a business’ direct costs, businesses face further losses when health and safety procedures aren’t followed correctly, including:
- The time it takes for a new employee to learn a new role and become productive in the place of an absent employee.
- The diminished quality of a product or service when experienced employees are absent.
- A potential loss of business, continuity or reputation due to an inadequate number of staff.
- The recruitment of temporary staff or contracted agency workers.
- Providing training and support to staff unskilled in a particular job-role.
The insurance illusion
Many employers are of the belief that if health and safety procedures aren’t implemented effectively, their insurance policies will be able to cover the costs of incurred through employee injuries or sickness. This isn’t the case however.
Employers have a duty of care towards the people they employ and so employers subsequently need to have Employer Liability Compulsory Insurance. In doing so, they will reduce insurance premiums, leading to more money in the bank in the long term. However, only a small number of incidents are covered by an employer’s insurance, which means that uninsured costs can often outweigh insured costs – something which comes straight off the businesses ‘bottom-line’ profits.
Costs that are incurred as a result of poor health and safety procedures, that aren’t covered by Employer Liability Compulsory Insurance, would include:
- Sick pay
- Lost time
- The damage or loss of raw materials and products
- Plant and equipment repairs
- Temporary labour and overtime costs
- Delays to production
- Insurance investigation time
- Business contract losses
- Legal costs
- The loss of business reputation
For any business, the establishment of whether their health and safety procedure is more likely to incur financial losses covered by insured costs is important, so too whether these costs are covered by an insurance policy. Failure to provide reliable health and safety procedures that prevent illness and injury could lead to a spike in the insurance premiums or difficulty when trying to obtain future insurance cover.
The cost of illness or injury
In total, the financial costs and human costs hitting the UK between 2014 and 2015 were set at £14.1bn. £9.3bn of this overall cost came from workplace illnesses, amounting to £17,600 per case, and £4.8bn was as a result of injury claims – an equivalent cost of £1.6m per fatal injury and £7,400 per non-fatal injury.
£8bn of this overall figure was attributed to human costs incurred by individuals who either fell ill or were injured in the workplace, while £2.8bn was incurred by employers in financial costs. A further £3.3bn was incurred by the government and the tax payer through contributions to workplace ill health and injury.
Employees can be left with many different costs when it comes to employee illnesses and injuries, one of which example is a fatal injury. This could have cost a business £106,544 in pay outs, whereas non-fatal injuries are typically substantially lower at £1,232 per case. Additionally, employees who are absent for more than seven days, could cost a business up to £8,219.
Although employers often effect and address their health and safety procedures, more often than not, they aren’t sustained and utilised by employees throughout an organisation on a daily basis. The costs incurred by employers when employees fall ill or get injured, set a precedent for health and safety strategies that are counter-productive in that they effectively negate the accumulative costs of situations that arise when the health and safety of employees gets compromised.