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May 11, 2016

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Sentencing guidelines 2016 – the impact so far

justice-423446_640Jonathan Hughes, associate director, Capita Property and Infrastructure discusses what kind of impact the Sentencing Guidelines, introduced this year, have had on businesses and whether the prospect of higher fines has contributed to more effective risk management.

On Saturday 6 February this year, the revised sentencing guidelines for health and safety offences came into force. After the first few months it is important to consider what the impact of this has been on businesses. Has the prospect of higher fines for health and safety breaches made employers focus on more effective risk management?

As safety professionals, we would argue that the moral obligation to keep people safe should be the primary focus for employers. However, we should also appreciate the monetary value that businesses place on effective risk management.

The cost to implement effective health and safety controls is a key consideration in the decision making process – businesses clearly consider the impact their decisions will have, both in terms of investment needed and their obligations as an employer to keep people safe.

With the prospect of higher fines for health and safety offences, many will no doubt be more diligent in implementing controls to avoid paying larger fines. But we also know that the fear of paying large fines is not always the main driver in health and safety management.

I was recently completing a strategic audit with a major organisation that, up until recently, had an employee sickness absence ratio of 10%. Each whole percentage point represented £2m in costs to the organisation. By implementing a range of health and wellbeing initiatives, the sickness absence ratio was reduced to 4%. This reduced their sickness absence cost by £12m per year – a significant financial saving by any measure.

The organisation in question already had an effective management system for health and safety, and so the risk of large fines was irrelevant. The key point here is that organisations are now looking at other drivers to improve their performance and this does not always centre on avoiding fines.

Mindset over matter

The increase in fines has certainly sharpened people’s attention but it possibly hasn’t had the direct impact on workplace safety that we might have hoped for. The businesses that are most concerned by fines are likely to be those that are already managing health and safety effectively.

In contrast, those businesses that have a poor attitude to safety are more likely to have incorrectly assessed the risk of poor practice in the first place – and so the new guidelines are unlikely to alter how they manage their business.

It can be hard to know whether the risk of a higher fine has changed or will change the mindset of these businesses, particularly at this early stage. I would suggest it hasn’t and that there is a real risk it won’t. If they haven’t managed safety effectively before, why would they start now?

The culture of an organisation, or the mindset of an executive team or business owner, is normally too deeply entrenched to change substantially. In the same way that that some thieves will always steal, some managers will always put their staff at risk regardless of the consequences – although fortunately, these organisations are very much in a minority.

So what other drivers are there that influence how an organisation manages health and safety?

For larger organisations there will be a number of other pressures. Businesses listed on the FTSE index are required to ethically manage their business and report key data to their shareholders and the market. Imagine the impact on a large multi-billion pound business that is fined for a significant safety breach. Potential fines can run in to the tens of millions of pounds. Will shareholders and investors be content with that? Will they sit back and allow the management team or executives responsible to continue in post?

For example, the financial and reputational risk of being a groundbreaking business who receives the largest corporate fine in the UK for gross health and safety breaches may well sharpen the focus of executives as they imagine the impact this would have on their employees, customers, supply chain, profits, share price etc.

Have the new sentencing guidelines had an impact on business yet? Yes, I am sure they have. For many businesses they will have impacted on their decision making and appetite for risk – but the real change will be only seen when the first few cases come through.

We’ll only know the true effect once we find out the scale of the fines that are eventually imposed – understanding the real financial cost will sharpen the minds of even the most unethical business owners. The real test will be whether there is any impact on the HSE accident stats over the next couple of years; only here will we see the real collective impact of the new guidelines.

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