The Cost of Health and Safety Compliance vs a Prosecution FineCategory: Health & Safety | Bryan Richards | Published on: Feb 20, 2017 | Updated: Feb 20, 2017 Read more: Health & Safety
Why do people invest in health and safety? What may seem like an obvious question can have numerous reasons. Legal obligation is often the main one cited, followed by health and safety publicity – no company wants to be seen to be without a health and safety plan, and there are certainly cases where a breach can damage a company’s reputation beyond repair, amongst both employees and customers. Other reasons include the cost of insurance as well as experience of accidents within the organisation.
But would businesses be more keen to invest in health and safety if they knew precisely how much they could save in pay-outs from a prosecution and fine? Increases in health and safety penalties last year mean larger companies could face fines of over £10 million for the most serious health and safety offences under new sentencing guidelines which came into force on 1st February 2016.
To put the costs into perspective, Arinite have produced research that compares the total health and safety breach fines in 2016 against the average cost of health and safety for large businesses and SMEs.
Weighing Up The Average Cost Of Compliance Vs A Breach Fine
According to the latest prosecution data at HSE, £32,438,677 worth of fines were issued in 2016 across the UK. Half of the total fines issued came from the manufacturing industry (£16,816,673), followed by extractive and utility supply companies (£7,375,120), and then construction (£4,824,983). The majority of suspended prison sentences came from manufacturing and construction.
In additional to company prosecution fines, the HSE estimate that the total cost of injuries and ill health from working conditions in 2014/15 was £14.1 billion, out of which £2.8 billion were covered by the employer.
If we break the prosecution data down into averages the data paints a slightly different story, with extractive and utility industries having amongst the lowest number of prosecutions but the largest average fines by far. The total average fine across all industries, large and small, was £115,440 in 2016, with a total of 281 prosecutions.
At Arinite, the majority of medium to large size companies we work with can expect to pay between £5-£20k per year for health and safety, and for small companies it is often less. This corroborates with a 2003 HSE survey into health and safety costs, which found that 27% of UK companies had spent less than £1,000 on health and safety in 2002-2003, whilst 17% had spent between £1001 – £5,000, 11% between £5,001 – £10,000, 21% between £10,001 £50,000, and 12% over £50,000.
Accounting for inflation, we’d expect companies to be paying around 30-40% higher than these figures in 2016. Even considering, the gains made by ensuring against a penalty are potentially huge – particularly for SMEs.
SMEs can expect to pay no more than around £40k a year for health and safety compliance, but could end up with a fine averaging £115k if found guilty of a breach.
The Three Biggest HSE Prosecution Cases Of 2016
The largest fine last year was for Alton Towers operator Merlin Attractions, who made national headlines and were made to pay £5 million in fines to HSE. The rollercoaster accident – which led to two teenagers each losing a leg – was the result of an engineer who said they “felt pressure” to get the Smiler back into service after it developed a fault shortly before the crash. Merlin Attractions has around 28,000 employees.
The second largest fine in 2016 was for Cristal Pigment UK Limited, a chemical company, who had a worker killed and one left with life changing injuries when they were exposed to a toxic vapour cloud. The investigation found the company had deviated from the normal operating procedures, which led to the dangerous build-up of the chemical. The company of 4,000 employees was fined £3 million for the offence.
Finally, Balfour Beatty Utility Solutions Limited – a construction company with 36,000 employees – were fined £2.6 million after an employee was killed when the trench he was working in collapsed. The HSE inspector said, “Balfour Beatty failed to adequately assess, plan and supervise the work being undertaken. Trench collapses are easy to prevent, and it is disappointing that James’ life was lost in such a tragic way.”
It is assumed that if employers are made aware of the potential costs due to negligence or simple lack of compliance, employers will take health and safety more seriously. But as recent cases show, this is often not the case. Many companies still lack the necessary knowledge, whilst others are aware of the requirements but do not have formal health and safety management systems in place to handle them.
Companies large and small, and particularly in the manufacturing industry, sometimes end up with a fine far above the cost of annual compliance, not to mention the pay-out costs to any employees affected by an incident.
Arinite clients appreciate we provide practical, no-nonsense advice about what you need to do to establish and maintain a safe and healthy working environment. My team of health and safety consultants take pride in keeping health and safety simple.
If you need to call upon our expert assistance, or just for an informal chat, please call our office 0207 947 9581, or drop me a line at email@example.com.
Bryan Richards 20th February 2017
Arinite Ltd, Warnford Court, 29 Throgmorton Street, London EC2N 2AT