Does safety and health compliance pay off?
In recent years, many firms have started to take safety and health more seriously, yet the number of critical violation cases reached a new high in 2017. With 866 cases in which the offender was charged $40,000 or more, it’s clear that compliance is still far from a priority for many businesses.
That’s surprising, considering the expenses a company faces if found guilty for a breach. Depending on the severity, a single violation can cost between $12,934 and $129,336. In many cases, more than one workplace safety violation will be found, which leads to a total cost that can easily surpass the annual compliance cost of a small to medium sized firm.
Research by health and safety consultant Arinite revealed that an average small to medium size company in the U.S. spends about $53,000 on health and safety a year. A single severe violation, such as creating life-threatening working conditions, not providing fall protection or protective clothing and gear can therefore cost more than two times the annual spending on compliance.
Prioritizing safety and health
U.S. businesses lose around $170 billion a year to costs from occupational injuries and illnesses. Studies have shown that a successful safety management strategy can reduce this number drastically; $1 invested in injury prevention will return between $2 and $6, as productivity, motivation and sustainability in the workplace increase.
However, 25% of micro-business employees and 17% of small business employees report never having received any kind of workplace safety training. Legally, employers are responsible for their staff’s safety and wellbeing within “reasonably practical” limits. Those kinds of vague statements make it difficult to pinpoint which actions are necessary to safeguard against accidents. Safety will always rely on many factors of which some can be outside the employer’s influence, like a worker’s personal well-being, which makes “guaranteeing” a safe workplace close to impossible.
Yet, for both moral and financial reasons, a company should aim for the highest degree of safety to prevent accidents.
The true cost of a fatality
As mentioned earlier, safety violations alone can be very expensive. However, the true cost of a fatal injury will be much higher than the issued violation fee.
Expenses, such as worker’s compensation, medical expenses, litigation or liability costs will need to be covered by the responsible person, in other words, the business owner. Additionally, any severe injury will bring along workplace disruptions, worker replacement, increased insurance premiums, attorney fees and a general loss of productivity and trust in the company.
In total, the actual cost of an occupational fatality can, therefore, be estimated between $1.4 million and $3 million.
In 2009, BP Texas City Refinery set an example that inspired many to improve their own health and safety plans when the company was fined a record-breaking $87 million. The refinery had been responsible for a large explosion that killed 15 workers and injured 170 in 2005 – a disaster which lead the OSHA to discover more than 200 safety violations, resulting in a $21 million fine. In the following years, BP not only failed to fix their previous mistakes, a further inspection in 2009 found more than 700 new violations on top of the existing ones. While $87 million will drive most firms to bankruptcy, the British multi-billion-dollar company was able to handle the situation easily. Unfortunately, not every business can afford to be so noncompliant.
Why compliance matters
Most companies cannot continue business operations after a scandal like this. For a smaller firm, even one violation might make the difference between survival and liquidation. However, despite all the economic reasons for implementing a thorough health and safety strategy, it really comes down to common sense.
A healthy, secure working environment is the fundamental base to any successful business. Happy workers make for good work and give room to growth. Even small injuries will encourage a high turnover rate, which damages a company’s reputation and ability to attract and retain high quality employees.
How to safeguard
Nowadays, resources on how to be compliant can easily be found online. Professional audits and training have become cheaper and are offered by both official and private agencies.
No matter the size of the firm, health and safety guidelines should be accessible to all. Regular safety training and briefings are important, especially when new members join the team. Making sure that everyone understands the material and can re-enact it is key. Only a safe workplace can provide a safe future.
Arinite is a health and safety consultancy providing support to a diverse international customer base both in the UK and overseas. https://www.arinite.co.uk/