Calculating the true cost of non-compliance - The London Health

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The business case for health and safety – gathering the evidence

Neal Stone
Director, Policy & Communications, British Safety Council
London Health and Safety Group, 17 September 2012

      “Raising Standards, Saving Lives”
 Working Well - five steps – see
Taking stock of our health and safety performance

Picture showing considerable improvement over last ten years:
• both the incident rate for major injuries and over 3 day injuries have
fallen over last three years – over 3 day injury rate by some 13%
• rate of reportable injury has fallen over last three years
• 173 workplace fatal injuries in 2011/12 down from 175 in 2010/11 –
lower than the five year trend of 196 workplace fatalities
• days lost per worker due to work related ill health and injury down
from 1.76 in 2000/02 to 1.23 in 2009/10
           So what does this mean in terms of economics?
           Statistics from HSE for 2010/11

• 1.2 million working people were suffering from a work-related illness

• 26.4 million working days lost due to work-related illness and workplace injury (excl.
cancers) – down from 28.5 million in 2009/10 (or 1.2 days per worker)

= Work-related ill health and injury costing Britain £14 billion a year

• Looking at 2009/10 figures, “somewhat over half of the total cost fell on individuals
whilst the remainder was shared between employers and government.”

           British Safety Council, May 2012
           Presentation to ENA SHE 2012 conference                                         5
Enforcement of health and safety

Enforcement action carried out by HSE, local authorities in

• 885 offences were instituted by HSE
• 283 offences were instituted by local authorities
• 15,837 enforcement notices were issued by all enforcing authorities.

Enforcement action carried out by HSE, local authorities in

• 912 offences were instituted by HSE
• 294 offences were instituted by local authorities
• 18,290 enforcement notices were issued by all enforcing authorities
Penalties for health and safety offences –
a snapshot of significant sanctions Jan – Jun 2006/12

Month          Jan    Feb           Mar    Apr    May    Jun
No of
with fines     4      2             5      2      4      3
over £100k
In 2012
£              180k   133k          300k   110k   280k   301k

No of fines
over £25k in   0      1             0      1      0      0

No of fines
over £25k in   0      0             0      1      2      0

“Raising Standards, Saving Lives”
HSE’s Fee For Intervention (FFI)

HSE in promoting FFI argues that it:
       • shifts the balance in favour of those doing the right thing;
         provide an incentive to operate within the law
       • recognises need for clear mutual expectations of how the
         scheme will work and provide confidence that it will be
         implemented fairly
       • HSE intends to publish a review after FFI’s first year, and
         will make the nature, number and outcome of the appeals
       • How many inspections needed to generate estimated
         £43million of additional receipts FFI to bring in

  Costs of occupational accidents and ill-health – from
  European Agency research (2004)
               Non-tangible                     Tangible

Victim         • pain and suffer                • loss of earnings
               • psychological suffering        • loss of productive time

Family and     • psychological suffering        • financial loss
friends                                         • additional cost burden

Colleagues     • bad feeling                    • increased workload
               • worry or trauma                • possible loss of time

Organisation   • loss of reputation             • lost production, quality
               • human relations suffer         • disruption and increased costs
                                                • admin, insurance, legal costs
Society        • reduction in human labour      • loss of production
               potential                        • benefit costs
               • reduction in quality of life   • costs of medical treatment and
What evidence is there on compliance costs?
Earlier research

• Entec study (2002) found that:
       • Medium and large companies expend most on training;
         small on training and PPE
       • Larger organisations believe benefits outweigh costs (may
         be related to SMEs having less experience of accidents;
         also less likely to have performance measures and targets
         in place)
       • See
• Organisations responded to ELCI cost pressures:
      • Primarily by trying to improve health and safety,
       • Also, to lesser extents, reducing operating costs,
         contesting claims and switching insurers.

What evidence is there on compliance costs?

• Wright et al (2005) in research for HSE, Changing business behaviour,
found that the list of key motivational factors remains largely unchanged from
previous research, namely:
        » enforcement/regulation, reputational risk, the moral case, avoiding
            cost of accidents and business incentives
        » organisational approach is also influenced by size and sector
• However notable that:
       » The financial incentive provided by insurance premiums had grown
        » The fear of enforcement is intertwined with the fear of reputational
          damage as well as business disruption
        » There was also evidence that the moral case remains a driver
        » It was also clear that understanding and awareness remain key

What evidence is there on compliance costs?

• More recently a PriceWaterhouseCooper’s study demonstrated a return on
  investment of £4.17 for every £1 when following the delivery of workplace
  wellbeing programmes. It is clear however that failure to address ill health
  results in significant costs to business.

• CBI quote that on average ill health costs each business £600 per employee
  per year.

• Long term absence contributes to up to 75% of absence costs (CIPD)
  demonstrating the value of early intervention in cases of ill health.

• MPs have recently quoted the value of legislation in the UK in terms of h&s
  for every £1 there is a £1.38 return on investment.

Recognition of factors influencing compliance

• Not all businesses are the same – low risk vs. high risk

• Ensuring clarity of regulations and requirements for business to ensure that
there is not over-compliance

• Sensible and proportionate management of risk – matter of understanding
risk and debunking myths around health & safety

• Learning lessons - Flixborough, Bhopal, Piper Alpha, Buncefield and Texas
City - evidence that lack of injuries and near misses is no guide whatsoever
that all is well in process safety terms. Need to balance short-term business

 Support for good health and safety

British Chamber of Commerce, May 2011:
“The BCC supports good health and safety regulation. The UK has a
good record on health and safety and it is essential that it is maintained.
There is no doubt that sensible rules are needed to prevent serious
However BCC in September 2012 said,
"While the Red Tape Challenge has delivered some welcome changes,
the overall number of regulations on the books remains far too high. The
extent to which businesses actually benefit will depend on whether the
regulations affected are the most burdensome ones or just arcane rules
that are no longer applied. We will measure the government's success
by the reduction in businesses costs, which means that employers will
expect come genuinely burdensome regulations to be scrapped."

Cost benefit of recent and planned reforms – the burden
of regulation?

• RIDDOR – change from three to seven day reporting – 75,000
fewer reports - annual net saving £240k – just over £3 per report
• Fourteen sets of legislation – including revocation of Notification
of Tower Crane Regs – annual net saving of £55k – scrapping 1450
registrations annually
• ACOP review – no regulatory impact assessment for the proposals
currently being consulted on
• Self-employed – preferred option would take 865,000 out of scope
– saving of £201k per annum – saving of just over £4 per self-
• Further RIDDOR reform – reduction of reporting requirements –
70,000 fewer reports submitted under proposed change – an
estimated annual saving of £1.8million - £40 per report

What evidence is there on non-compliance costs?
from HSE’s Cost to Britain of injuries and ill-health, 2009/10

What evidence is there on non-compliance costs?
from HSE’s Cost to Britain of injuries and ill-health, 2009/10

      What evidence is there on non-compliance costs?
      from HSE’s Cost to Britain of injuries and ill-health, 2009/10

• Costs arising from benefits
payments, reduction in tax and
national insurance receipts)

• Health and rehabilitation costs

• Administration and legal costs


Neal Stone
Director of Policy & Communications
British Safety Council


twitter @nealleonstone

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