Viewing health and safety as just a hoop to jump through for box-ticking compliance is a very outdated view. Rather than being a cost, reducing workplace risk can be seen as an investment – one that we can expect a return on.
Of course, a lot of the benefits of workplace safety can be either obscure or difficult to quantify, meaning that a return on investment (ROI) is tricky to calculate. But, that doesn’t make it impossible…
The staggering financial drain of workplace incidents
There are some pretty heavy financial consequences to workplace incidents beyond the human suffering. They’re not just a drain on businesses, but the problem is so widespread that it has an impact on the national economy.
According to the Health and Safety Executive (HSE), both workplace injuries and ill health cost the UK economy a combined £21.6 billion in just 2023 alone. These are, in part, driven by the financial impact of safety failures. So, proactively investing in a safety culture and the right equipment is clearly needed, and you can learn more about what products you need.
The HSE’s latest data shows that over 33 million working days were lost in 2024 due to either work-related illness and injury, made it hugely detrimental to productivity. For individual businesses, the costs are having to pay that employee’s salary while they recover (and potentially any legal costs, should they be to blame). Further costs include paying for overtime with other employees to cover this loss, which is usually a premium on their ordinary wage, or perhaps the slog of recruitment of temporary cover.
There are indirect costs too, like damage to equipment, business interruption, loss of expertise and even reputational harm.
From mandatory expense to strategic advantage
Safety compliance investment means looking at workplace safety as an opportunity. For forward-thinking firms, compliance is the baseline, not the goal, and strategic advantage can be built from thereon. Health and safety practitioner guidance can help leave no stone unturned.
This transition in mentality and culture means moving away from being reactive and towards more proactive strategies. It should be ingrained as a core value via training, team talks, and so on. Making the individual more aware of its importance and the protocols is the best way to reduce accidents, as top-down measures can only take you so far.
Exclusively tracking indicators like incident rates involve a lag, and this leads to being reactive (e.g., the costs are already incurred). Instead, better metrics are needed if you’re going to estimate an ROI, and these include percentage of completed safety training, near-miss reporting rates, the closure rate of identified hazards, and so on.
A practical formula for safety ROI
To secure board-level buy-in, a compelling business case needs to be grounded in financial data. The formula for workplace safety ROI is direct: ROI = (Financial Gains – Cost of Investment) / Cost of Investment.
The Cost of Investment is a comprehensive figure, including the direct purchase price of equipment and personal protective equipment (PPE), but also the additional cost of training, implementation, maintenance…
The Financial Gains are what trips up many organisations. The return is demonstrated by tracking clear KPIs over time, and this includes those “reactive” ones too. Direct savings can come from reduced insurance premiums, lower legal fees, a decrease in incident-related payouts (and the recruitment/overtime that came with that). In other words, your expenses need to be clearly labelled as being from a result of injury or accidents, be it machine maintenance or paying sick pay.
You can estimate the reduced risk that is gained from the investment by forecasting new accident rates and such. These can then be priced up as monetary savings and placed in the formula. Don’t forget to include any savings from reduced staff turnover and the recruitment/training savings from that.
One study found that, in the US, indirect costs can often be 20 times greater than the immediately obvious direct costs. And, with that, to cover one $500 accident, an employer would need to bottle and sell over 61,000 cans of fizzy drinks; or bake/sell over 235,000 donuts. A study by Susan Jervis also found a correlation between safety performance and that company’s financial results. If nothing else, struggling safety standards is often a red flag to investors that this company is struggling operationally (and perhaps financially).
The cost-benefit of safety signage and other investments in injury mitigation is clear. While every operation is different, it’s important to note that the tolerance for workplace accidents is falling, and the indirect costs are rising. ROI calculations can be useful in getting the backing from the board to treat risk mitigation more seriously, and see workplace safety as an opportunity, not a cost.