Health and safety should be a priority for every organisation. Serious injuries, ill-health and damage can occur as a result of poor workplace health and safety, negligence or unsafe business operations. Poor risk management can also lead to irreversible reputational damage and reduced employee morale, motivation and satisfaction. Plus, there’s the cost of non-compliance with the numerous health and safety regulations to consider. This can lead to expenses such as sick pay and cover, reputational damage causing lost sales, increased insurance premiums, and legal penalties, including fines and the potential for a prison sentence and a criminal record.
We’re living in a digital world where news travels faster than ever before. If businesses breach health and safety regulations, put people’s lives at risk or, worse, if someone is harmed as a result of poor health and safety (H&S) standards, the news will spread like wildfire and this can be enough to ruin any business’s reputation.
Organisations don’t just have a moral responsibility to protect people from harm, they’re also legally obliged to make sure operations and workplaces are as safe as possible. Breaching health and safety regulations, such as CDM in construction, comes with many financial costs for businesses — including fees and penalties from the Health and Safety Executive (HSE) and compensation payouts to injured parties.
In this article, we outline the cost of non-compliance with health and safety regulations and explore some of the ways poor H&S standards can put financial pressure on your business.
The Cost of Sick Pay and Cover
While every employee will take the occasional sick day — the average number of sick days per employee was 4.4 in 2019 — each day your staff take off to recover from ill-health costs your business money. You may need to offer your employees sick pay or pay for cover. In the UK, the average cost of 4.4 sick days is £463.76, but the cost of sick pay and cover will vary depending on employees’ wages and how long they take off.
Poor health and safety standards in your workplace can increase the likelihood of workers suffering from work-related ill health or injuries and needing to take time off to recover. Lack of compliance with regulations, codes of practice and guidance relating to health and safety can, in turn, increase the costs of sick pay and cover.
The Cost of Non-Compliance Can Cause Profits to Take a Hit
Non-compliance with health and safety regulations inevitably leads to reputational damage for most businesses. If accidents happen in your workplace as a result of poor risk management, word will likely spread about your business’s lack of commitment to keeping workers, site visitors or members of the public safe. Similarly, if legal action is taken against your business in response to a breach of regulations, this will have a knock-on effect on your reputation.
When your image or reputation takes a hit, this can have a significant impact on your profitability. You may experience a drop in customer/client satisfaction or loyalty and land fewer sales or contracts as a result. You might also experience employee retention issues and recruitment may become a trickier and more costly process, preventing you from achieving maximum profitability.
HSE Penalties: The Average Fine is £150,000
If your business is found to be guilty of not complying with regulations, you could face penalties, fines or even imprisonment. Fines are the most common punishment and one of the main deterrents for non-compliance.
The Sentencing Council introduced new sentencing guidelines in 2016 that brought with them harsher penalties and fines available to the courts for organisations who do not manage health and safety matters effectively. In 2018/2019, the average health and safety fine rose to £150,000 — the highest it’s ever been — and a total of £54.5 million worth of fines were issued.
£150,000 is a hefty enough fine for most businesses, but larger organisations and those that commit serious offences could face even higher fines, potentially costing millions of pounds.
Fines are decided based on three main factors:
- Culpability — Whether the breach was deliberate, a result of disregard for the law or an isolated, minor incident.
- Harm — How serious was the breach? What level of harm did it/could it have caused?
- Turnover — Health and safety fines are proportionate to the size and turnover of the business. Smaller businesses will face smaller fines than those with a higher turnover. For example, businesses with a turnover of less than £2 million will face fines starting at £250,000 for breaches with ‘Very High Culpability’, whereas businesses with a turnover of over £50 million will face fines starting at £4 million for breaches with the same level of severity and culpability.
In addition to your fine, you may also have to cover the prosecution expenses of your trial, further increasing the costs of non-compliance.
Compensation Payouts for Injuries or Ill-Health
In addition to HSE fines and sick pay, if poor health and safety standards in your workplace cause injuries or ill-health, you face the risk of the affected people taking legal action against you. If you’re found to have breached health and safety regulations, you may need to make large compensation payouts to anyone suffering from an injury or health condition as a result of your non-compliance.
Compensation costs can include payments for loss of earnings and medical treatment or care.
Increased Insurance Premiums
After being found guilty of breaching health and safety regulations, your existing insurance policies might be invalidated and, when trying to find new cover, providers may be reluctant to offer you insurance. Those that do will likely insist on increasing your premium.
This is because insurance providers will have their own risk management policies and procedures and non-compliance is associated with high levels of risk, particularly financial risk.
Get Salus Support
Your business doesn’t have to face the expensive costs of non-compliance. Salus can help you achieve compliance not just with health and safety regulations, but across many different areas of risk management.
By becoming a Salus H&S Advisory Client, you’ll unlock access to a wide range of risk management resources, including compliance checklists and risk assessment templates. Find the right Salus solution package for your business now.
If you need extra support managing your Health & Safety responsibilities, our H&S consultants can help.