Financial Arguments for Good Health & Safety

In 1993 the Health and Safety Executive published research that showed the hidden costs of accidents. For every £1 recovered from insurance companies, between £8 and £36 were uninsured and had to be paid from company profits. In one case at a hospital, this amounted to 5% of running costs. In another case, a transport company, it totalled 37% of the annual profits.

A popular way of depicting the difference between insured and uninsured costs is by means of an iceberg analogy.

Figure 1. Iceberg Analogy Showing Insured\Uninsured Costs.

The financial reasons for maintaining good standards of health and safety are:

  • To maximise profits.
  • To minimise costs.

How does good H&S management maximise profits?

  • The workforce tends to be more motivated if they feel their employer cares for their welfare. This results in numerous benefits, such as:
    • Improved production speed.
    • Improved quality.
    • Less absenteeism.
  • Many costs are avoided, such as costs related to product damage, equipment repair, additional equipment hire, overtime costs, courts costs and fines, etc.
  • Thanks to the improved reliability and quality, and the resulting positive reputation with customers, there is a greater chance of securing future contracts and sales.

Possible Uninsured Costs of Accidents include:

  • Damage to products, materials, equipment, and the building.
  • Clean up costs, and first aid.
  • Fines, and associated legal costs.
  • Production delays and lost production.
  • The overtime required to catch back the lost time.
  • Sick pay of injured workers.
  • Hire of temporary labour.
  • The time of supervisors and managers to investigate accidents and introduce corrective control measures.
  • Loss of expertise (experience of injured employees).
  • Resulting increase in insurance premiums.
  • Loss of goodwill with clients and staff, resulting in fewer sales and difficulties retaining and recruiting workers.
  • Increase in staff turnover.
  • Decrease in morale, resulting in lower production and quality which are difficult to quantify.