Health and Safety

The cost of health and safety non-compliance

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“If You Think Education Is Expensive, Try Ignorance “from Derek Bok – President of Harvard University, March 1978. As I was reading an article, I came across this quote and it got me thinking.

We can view this quote in relation to health and safety compliance in South Africa. What is the real cost of non-compliance to companies? As everyone focuses on cutting budgets, minimising expenditure and so forth, Health and Safety training budget is always the one at the top of the list. When an employee’s position in a company becomes redundant, they are shipped to the Health and Safety department of a company.

Part of our company’s services is to assist organizations implement requirements of the Occupational Health and Safety Act. As we approach our prospective clients in an attempt to get business from them, we receive rather interesting feedback from different sectors who sometimes blatantly tell us that Health and Safety compliance is not meant for their sector, as they politely recommend that we focus our attention on the Construction and Mining industry.  Some say their companies are too small and they can’t afford to comply. This is the myth held by many in our society. To me, it sounds more like hiding your head in the sand.

Compliance to the OHS Act is a reality, whether a company employs 5 staff or 5000. The requirements may vary per industry and depending on the number of employees they have, but legal requirements are still applicable. It makes me wonder, do company owners know the financial impact of non-compliance has on the bottom line? If you think legal compliance is expensive, try non-compliance. There is a concept known as the Ice-berg effect when dealing with work related incidents. This is merely from a cost point of view. Now that I have your attention, let’s look at events that could potentially happen following a work-related incident. Most companies only look direct costs related to an incident and forget that there are indirect costs they need to worry about

Indirect costs refer to things such as:

  • Property damage

A Forklift that drove into a wall due to brake failure can cause serious injuries and damage to both the wall and the Forklift itself.  The Forklift will need to be replaced while the wall could need replacing, depending on the extent pf damage. The cost or repairing the wall and Forklift replacement are indirect costs that employers sometimes fail to link to non-compliance.

  • Work stoppages

The incident itself may affect certain processes within a section where the damage occurred., resulting in lost time and process or production losses, directly affecting the bottom line.

  • Incident investigation time

Incident investigation may take anything from 3 days to a month depending on the nature of the event and its impact. While incident investigation is on-going, the process of repairing the wall might be delayed while the actual work inside that building is on hold.

  • Medical costs

The cost of treating all injured could be costly especially if the employer is not insured or covered by COID (Compensation of Occupational Injuries and diseases Act).

  • Legal costs

If this incident affected members of the public or the contractors’ employees that are not covered by COID Act, this could mean possible law-suits and public liability claims.

  • Reputational damage

There’s a high chance of being shut down by the Department of Labour should you be found to be in breach of legal obligations. There is a lot of activities that take place while you are busy dealing with an incident investigation and things shouldn’t be looked at face value. So apart from dealing with law-suits depending on the nature of the incident and who it affected, your business could close its doors.

  • The cost of replacing an injured employee and their subsequent training.

It’s very clear that health and safety compliance is not a luxury but a necessity for the following reasons. Reasons for compliance to Health and Safety as follows:

a) Legal

Legal is also part of good governance according to the International Labour Organisation. (ILO). Imagine the negative publicity that follows a disaster in a company, sometimes some of the incidents can be remembered long after the incident has happened.

b) Financial

As much as there is a cost attached to legal compliance, the cost of non-compliance is much higher. Employers have an obligation to seek assistance and guidance form companies that offer consulting services to help interpret legal requirements. While there are training programs to be budgeted for, it’s a fraction of the real costs should there be non-compliance.

c) Moral obligations

While the company may recover financially following an incident it might take forever to recover the loss due to bad publicity. Morally, employees would like to work for a company that takes care of its employees and doesn’t kill people. Prospective employees might be put off by a company that doesn’t seem to care about the welfare of its employees, and this is another indirect loss of human resources related to non-compliance.

With a good Safety management system in place any company, big or small, can afford to comply to legal requirements. Yes, legal compliance does make business sense. For more information on health and safety services, visit our website www.denovohse.co.za

Written by Juliet Kekana – Managing Director – De-novo HSE Training and Consulting

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