It's a popular misconception that you can "transfer" the risk of H&S to a third party and whilst you can engage an external person/organisation as a competent person, the risks stay with the Business.
Risk can be dealt with in 3 ways, so if you have accepted Risk then you can either Transfer it (i.e. Insurance), Manage it, or Retain it as illustrated by the diagram below.
With H&S your Employers and Public Liability Insurance deals with the bodily injury or health element of any H&S incident but otherwise all of the other costs associated are born by the Business. These can only be mitigated by the how it manages H&S, either reducing the likelihood of the risk or its consequence/severity.
And it's the Business' responsibility to appoint a Competent Person, so if the Competent Person fails in their duties, the Business is responsible. If an external provider is used there would be rights of recourse against them and this is why many of the traditional providers include a legal expense element to their offer - to cover the Business' legal costs if they make a mistake.
The costs break down in to 2 areas - Fines and Business Costs.
Fines
In 2016 there were changes to the way that fines are calculated for Corporate Manslaughter, H&S and Food Safety & Hygiene Offences, these were set by the Sentencing Guidelines Council which introduced 3 criteria for the calculation of a fine being:
- The size of the organisation
- The level of injury/harm
- The culpability of the organisation
So, a business with with a £2-£10m Turnover which has a very serious incident, with a high level of harm and who are highly culpable will be fined between £300k and £1.6m. This increases to £1m to £4m if the Turnover is between £10m-£50m. If the incident gave rise to a fatality (Corporate Manslaughter) then these ranges change to £540k to £2.8m and £1.8m to £7.5m.
This has seen a significant increase in the levels of fines awarded for H&S Offences since 2016.
In addition, if an organisation is found to be in material breach of H&S law, it will have to pay for the time it takes us to identify the breach and help you put things right. This includes investigating and taking enforcement action and is called fee for intervention (FFI).
Business Costs
There will inevitably be a wider impact of an incident which might include some or all of those listed below. Some will be immediate others will have a longer lasting impact. Insurance Companies generally see that 1 incident and successful Employers Liability claims gives rise to more, which perhaps is not unsurprising given the compensation culture that has developed in the UK.
- Loss of management time/opportunity cost
- Loss of access to premises
- Deteriorating workforce relationship/reduced employee engagement
- Reduced productivity
- Damaged reputation/brand
- Loss of business
- Loss of customers
- Costs of managing poor publicity
- Additional costs of delivering “product/service” to customers
- Legal expenses
- Increased costs of risk transfer
- Loss of value of the business
These are perhaps less obvious and will depend on the circumstances harder to quantify, but a serious H&S incident will sap management time and focus and this will have a knock-on effect to the rest of the activities.