HSE Guidance from “Reduce Risks – Cut Costs” (INDG355)
Direct and Indirect Costs
Direct costs are easily attributed to an incident, including:
- fines
- first aid
- sick pay
- medical treatment
- equipment repairs/replacement
- lost or damaged stock
- lost production time
- replacement staffing
Indirect costs can remain hidden and may not link to a single incident. Poor health and safety performance still incurs losses over time, including:
- time spent investigating incidents
- loss of goodwill
- loss of reputation
- low staff morale
- lost contracts
- higher recruitment costs
- increased insurance premiums
Insured and Uninsured Costs
Additional costs include those related to replacement labour, accident investigation time, downtime, and increased insurance premiums due to poor claims history.
If an accident causes an injury, the injured worker may claim personal injury compensation. Damages depend on factors like loss of faculty (e.g., sight or hearing), the injury’s permanence, and its impact on the claimant’s earning ability.
The financial cost of accidents can be likened to an iceberg: visible costs are covered by insurance, while hidden, uninsured costs below the surface are much greater.
Employers’ liability insurance covers some financial costs, but businesses still face costs such as:
- lost time
- sick pay
- fines
- retraining
- lawyer’s fees
- damage to stock/equipment
- loss of reputation
- lost contracts
These hidden costs can significantly impact a business, emphasising the importance of robust health and safety practices.
