Legislation makes many accountants responsible for the health and safety of the workers in their organizations. How do you ensure your business is safe?
New Zealand’s workplace health and safety records paint a very grim picture.
Every year, 50 to 60 people are killed in workplace incidents, and hundreds more die as a result of work-related ill health. New Zealand’s fatality statistics are nearly twice as high as Australia’s, and three times as high as those of the UK.
These numbers, and the Pike River Mine Disaster which killed 29 New Zealand men in November 2010, helped prompt the Health and Safety at Work Act 2015. That law made organizations responsible for ensuring they meet health and safety responsibilities.
Essentially, New Zealand adopted the Australian Work Health and Safety Act 2011, which was introduced to harmonize work, health and safety regulations across most Australian states and territories.
Obligations under the new legislation
John Xerri is a partner in Deloitte’s Risk Advisory in Sydney and specializes in work health and safety (WHS). He says the aim of the legislation is to have WHS viewed as normal business practice and to remove the perception that it is merely ancillary.
“Up until the legislative changes, WHS was observed, but generally by someone well down in an organization, while the rest of the business went about what it was meant to be doing – running the business,” he says.
The new law prescribes that the “person conducting a business or undertaking” (PCBU) and its officers, or someone who has influence and control of the PCBU or organization, is responsible for the health and safety of workers.
Says Xerri: “Depending on the structure of an organization, some accountants could now be defined as officers – and all of a sudden they have duties and obligations under the new legislation.”
In the traditional accounting space, Xerri says an accountant’s role in life is o know what the business is doing. Health and safety presents a similar problem, “so the roles are very much aligned”.
Xerri says that under the new laws WHS has certainly achieved a higher profile and gained a lot of boardroom and senior management airplay, as clear obligations are targeted at that senior level.
Hazards and risks
One of the requirements in the legislation is that an organization must understand the nature of business’s hazards and risks.
“And that’s interesting if you have outside directors who have little understanding of what that business is about.”
The key difference between the old and new legislations, Xerri says, is that it took health and safety from being reactive – something that you do when something has gone wrong – to being proactive.
“The legislation now places a duty on an organization to proactively seek and eliminate risk. The legislation is enshrined in that. And prosecutions are now taking place on risk alone. That is the power of the legislation – an incident does not have to occur for the regulator to take action.”
A new approach for NZ
Chris Alderson is a director at PwC New Zealand and leads the Health and Safety consulting practice nationally.
He says while the Pike River mine disaster was definitely a call to action, there was general acknowledgement that New Zealand’s legislative framework needed to come into line with those of the UK, Canada and Australia.
“Some more advanced organizations in New Zealand were already moving to a new approach to health and safety, which focused a lot more on critical risk management rather than the traditional focus on lag-based measures like total recordable injury rates.”
Alderson says accountants need to ask risk questions. “What is the underlying risk that a health and safety initiative is aimed at? How does the spend strengthen the control environment, improve the organization’s culture or facilitate better governance?”
Alderson focuses on the law’s effects on people. “The consequences of a major workplace accident or preventable illness are devastating to the individuals involved, their families, and
have long-term impacts on the organization.”
Alderson says the first prosecutions are only now coming through and that penalties will vary. “An individual worker could be fined as much as NZ$300,000, an officer up to NZ$600,000 – and both categories could also include up to five years in prison. The organization can be fined up to NZ$3 million.” He says this amount cannot be insured against under the act, although legal costs can be.
Keeping safe on a budget
Deaths, jail time and millions of dollars are no trifling matters. So how can a business with budget constraints stay safe? Alderson says it’s all about focus.
“One thing we like to see is an understanding of the potentially hazardous activities that the organization’s workers and contractors regularly undertake.”
“Every business will be different, but if you can identify and acknowledge what these are, then you can prioritize where you need to spend to manage the risk of something going wrong.”
He advises trying to eliminate an activity or substitute it with one that carries a lower risk.
“For example, why send somebody into a confined space when you can send a remote vehicle or drone?
Spending on engineering controls is also a great investment – if you can protect the human from making a mistake with good equipment, then this is money well spent.”
Ultimately, he says, you need to put yourself in the eyes of an independent observer who would ask whether you had done enough to reduce potentially high-risk situations and activities to an acceptable level.
“I think that philosophically, accountants are well-placed. They can bring their critical thinking skills to bear on health and safety conversations within their organizations,” says Alderson.
“They should not feel that it is solely the realm of health and safety professionals or even operational managers.”
Reference: Malkovic, T., 2018. Acuity December/January. Health & Safety/Page 76: Acuity.