The quest for accurate determination of the costs of poor occupational health and safety (OHS) has been a regular discussion point in this blog but the quest may be a never-ending one and ultimately pointless.
Recently the UK’s HSE Chairman, Judith Hackett took the Forum for Private Business (FPB) to task over estimates of OHS compliance costs. FPB stated that
“The cost of compliance for the UK’s 1.2 million micro, small and medium sized businesses is £20 billion of actual costs and £41 billion if you include opportunity costs’.”
Hackett was unable to look at the claims as the FPB report was only for members. This is a common marketing tactic where some information is released publicly in order to generate a demand which can be satisfied only with a membership or payment. The downside of this tactic is that the carefully constructed statements become accepted as fact without allowing those facts to be independently verified.
Hackett also points out that there is an insurance element to the cost estimates that is not usually in the consideration of OHS compliance costs.
A contributor to this situation seems to be the segmentation of the OHS regulatory process in relation to small business. Establishing a two-tier regulatory system in the UK was always going to cause confusion and generate opportunities for business support services like FPB.
HSE has a page dedicated to discussing the business costs of safety, primarily through the context of leadership. Around ten years ago the HSE had a slightly different approach. A media release from time introduced a “ready reckoner” for costs (no longer available) and stated:
“Health and safety failures currently cost Britain’s employers up to a staggering £6.5 billion every year. Over 25 million working days are lost annually, with over a million workers suffering from work-related accidents and even more falling prey to work-related ill-health.”
and, in relation to small business:
“Small firms are often operating on tight margins. They may not have experienced many accidents or cases of ill health, but when they do these can often have a disproportionate impact on the business.”
The media release included a long list of “major injury and ill-health costs not covered by insurance” but probably of more relevance is a 2005 research report by the HSE “Perceptions of the cost implications of health and safety failures” which lists considerations that outweigh the moral desire to eliminate or minimise harm:
“The avoidance or reduction of accident and work-related ill health costs per se does not appear to be the primary motivating factor for effective health and safety management. A combination of other interlinked factors emerged as being more influential in driving the health and safety agenda in most organisations, including:
- avoidance or reduction of liability claims;
- potential legal exposure;
- concern over the cost of insurance premiums;
- external pressures from insurance companies;
- maintenance of corporate image and reputation;
- customer and client expectations;
- government targets;
- moral obligations;
- staff morale;
- absence, recruitment and retention, and
- impact on productivity, efficiency and quality of service delivery.
However, it was generally acknowledged that health and safety failures might ultimately impact on the financial performance of an organisation through any of these higher level factors.” (page iv – bullets added)
Judith Hackett’s frustrations are understandable. The attempt to illustrate the importance of, or the burden of, OHS in financial terms is a constant desire. But it is also ridiculously complex, perhaps to the extent that it may be a pointless exercise.
Recent Australian research in to OHS business costs has refined our understanding of OHS costs but still acknowledges that determining accurate data is still evolving. O’Neill wrote:
“… demonstrating the financial case for investment can be highly problematic. Not only are many relevant costs hidden or externalised, but the work health and safety implications of many operating and financing decisions are often overlooked because critical interdependencies between ‘safe and healthy work’ and the four P’s of planning, procurement, production and performance (including productivity) are poorly understood.” (page 4)
There will always be a desire to quantify the economic costs of workplace safety failures and their remediation but in many ways this desire may be a hindrance to safety innovation and creative thought. Judith Hackett, as the HSE Chair, must engage in disputes and discussions on the cost aspect of OHS but the discussion can become a dominant element of the discourse to the detriment of the worker safety and the aim of reducing harm.
