OHS harmonisation to result in a substantial increase in costs to business

Australian lawyer Andrew Douglas has provided a frank assessment of the OHS harmonisation process instigated by the Australian government to reduce red tape and administrative costs of safety.  In Smart Company on 1 March 2011, Douglas wrote:

“…the Model Act, the regulations and documents that flow from it will dramatically increase state-based businesses legislative compliance, will massively increase the paperwork proving compliance and will inevitably lead to a substantial increase in costs to business in managing safety and OHS.”

Most State governments continue to support the harmonisation process, in almost all its elements, as a positive for business. So what’s the story here?

Andrew Douglas’ opinion needs serious consideration as it is one of the few contrary positions expressed to date.

Occupational health and safety compliance has never been a friend to small business.  OHS cannot be implemented “on the cheap” and has always been a business cost.  In some small businesses depending on the type of industry, compliance costs are a more significant part of the operating budget than in others but OHS applies equally across all workplaces regardless of these variations.  This situation has often been described as unfair but the alternative is a two-tier compliance system that is likely to be very difficult to implement and enforce.

Harmonisation has taken a similar one-size-fits-all approach to safety rather than looking at the core structures of safety management and compliance.  A review was certainly warranted almost thirty years on from the original legislation and forty years on from Robens’ inquiry but Australia has chosen to tweak the laws for harmonisation purposes.

Australia is not without the expertise to have undertaken a Robens-style analysis.  Prominent OHS academics and researchers such as Ron McCallum, Michael Quinlan and others could have formed a wonderful basis for a structural review but we must settle for tweaks.

The government has committed itself to the harmonisation process and, although it may fall over due to political issues, changes will occur from 1 January 2012.  However, the government needs to acknowledge the limitations of this approach and the increased costs of safety that Andrew Douglas has identified.  If safety is going to increase its prominence as and unavoidable but necessary element of business operations, the government should apply some of those business elements to OHS law changes.  It is suggested that the following options be considered

  • On the anniversary of the introduction of the OHS laws, an investigation be undertaken to assess the new costs of compliance across all sectors of business with the results to be considered and implemented within 6 months after the report.
  • The new laws include a sunset provision of five years with a concrete obligation that a root and branch analysis be undertaken.
  • From January 2013, Safe Work Australia begin a consultative process looking at safety management principles, concepts and application across all levels of business in order to provide case studies and national guidance on safety management strategies that result in genuine safety improvements.

Kevin Jones

reservoir, victoria, australia
Categories business, economics, government, law, lawyers, OHS, politics, safety, small business, UncategorizedTags , , ,

14 thoughts on “OHS harmonisation to result in a substantial increase in costs to business”

  1. Wow, I really hadn\’t considered harmonisation to be a bad thing at all, but it appears some think it is. Sure the regs leave some to be desired if you are in a specific jurisdiction or type of work, but isn\’t it better to be harmonised?

    The Act itself is brilliant, broader and clearer on duties and who is who. It provides for a defence at law (unlike NSW) and also encourages senior management accountability and safety leadership through increased responsibilities and due dilligence, whilst the penalties actually mean something for a change!

    There are complaints that small business will not improve through legislation. Give me 5 examples of SME\’s that actually know the name of the OHS legislation in their jurisdiction, let alone the details of it. In reality SME\’s do whatever seems natural and will comply as much as someone tells them they have to. Many would do nothing if they could get away with it… and do. So these laws will do little to change this, but when did any law do anything to change this? How could it?

    At least safety profesisonals only have to learn one piece of legislation now, and managers might actually be induced to manage or lose their house. Bring on harmonisation! The total $1 mil increase in costs to business nationally (it will be negligible) will be far outweighed by the $1 bil saved through regulator duplication, and we may finally get some help from regulators instead of bad advice and excuses.

  2. I’ve read the article, the comments above and the model act, regulations and codes of practice and I’m at a loss to see where all these increased compliance costs are. Something as simple as changeing the name of the legisaltion and cross referencing the new sections in policies and procedures will be a significant task that will require significant rescources and be a source of distraction for health and safety personnel who should be focussed on the hazards and risks in the business. Really outstanding post and very helpful. I appreciate your article and specially ideas or suggestion that you provided are excellent. These are very helpful for organize your home. Extremely thanks for post this informative article. Very nice written. hard hitting facts with dash of humur. I really loved the way you made it and thanks for the share.

  3. What a shame….. What a shame that the money already spent on this sham was not invested in creating an environment for real change and education to help with that change. I shudder to think how much has been wasted so far, meetings, airfares, accommodation, whitepapers, information sessions, feedback groups, seminars, people discussion and public consultation and like Greg pointed out the costs to come, from aligning you systems to the new requirements, training employees, etc. The cross boarder businesses this was supposed to help in the main, were already applying best practice approaches. e.g. one jurisdiction required 2 emergency drills the other only one the company would have 2 for all workplaces in it business. These changes are not going to simplify things, the things that really matter, e.g. if you move dangerous goods around you are still going to need multiple permits, multiple licenses, pay multiple fees to multiple governments, councils, departments depending on the States and Territories you travel through.

    If I thought for one minute there would be a cost benefit out of these changes I would be right behind them. What a shame…….a lost opportunity.
    What a shame

  4. Me, I look for the detail with this sort of stuff.

    So far I\’ve been working through the proposed WHS public comment draft via the pretty good WorkSafe Vic comparative table (comparing with the Vic OHS regs). Checking the differences in the actual wording of the WHS stuff it seems there a few proposed WHS regs that if they came into operation are going to cause grief to some operators (including the enforcement agencies).

    However, I agree with Peter W. about the proposed regs not meaning much to a small business. Only this morning I sent an email to a small business warehouse/distribution business client to assure them that the SMS we\’re slowly developing is not going to need many changes at all if the WHS stuff came into operation. Very small changes.

    I did notice there were a bunch of provisions in the WHS drafts call for more frequent registration and notification renewals. They look to be potentially problematic for bigger companies and for the enforcement agencies (e.g. annual renewal registration for plant requiring registration).

    So far it looks to me like the WHS draft has aimed to include all the expected good practice and code of practice stuff into the draft Reg. Something to be said for that, something to be said against it.

    Yep, it\’s sound to make the quasi regulatory obligations quite categorically a reg duty because it provides compliance clarity. But there is also a problem with that, if say a code of practice recommendation has proved itself to be providing sufficient compliance information and is able to be enforced with no problems. And that is that a Regulation is a lot slower to amend if there is a stuff-up or there\’s a need to remedy an obligation that ain\’t working properly.

    Given the compliance \”density\” of the proposed WHS Regulation (meaning how many specific duties and things it covers) I\’m guesstimating that irrespective of the thoroughness of adoption of suggested changes, this is a draft Reg that looks like it will need lots of amending tweaks over time. We are in the thick of looking at the specifics now, but I think we need to be having a hard look at the various jurisdiction\’s reg amendment mechanisms to make sure they are up to keeping up the pace of changes that will be essential to keep a \”harmonised\” law harmonised. Drafting rule #1 is: only legislate for stuff you must legislate for – overdo it in terms of requirements and detail and you will be chasing your tail fixing up oversights, glitches and silly mistakes.

  5. There are also broader and more important issues to consider regarding the harmonisation debate.

    Simply put, despite the effort, resource consumption and investment in achieving harmonisation, it is unlikely that the process itself will achieve any meaningful reduction in fatality or injury performance. We will improve operational efficiency as it is relevant to businesses that operate beyond the bounds of one state. We may see an increase in the level of auditing and reporting occurring mostly within big business who in many circumstances are already making significant efforts to improve Safety outcomes. But that’s about it!! SME’s will largely be unaffected in practical terms and injury performance will remain largely the same as it is now and has been for many years.

    Where is the debate on how Australia can significantly improving our Safety performance? We (Peter Wagner & Associates) undertook research with some of Australia\’s leading CEO\’s that confirms the road to transform Safety performance has less to with due diligence and auditing and much more to do with questions of Leadership, developing a resilient Safety Culture and critically, engaging with the workforce in meaningful dialogue relevant to the work that is being carried out. Safety Management Systems and consequent auditing provides an entry level framework, they are not the complete solution.

    There is an estimated 260 traumatic fatalities, between 5,000 to 8,000 workplace illness related deaths (Access Economics, 2003), 700,000 workers’ compensation claims, premiums in excess of $7 billion, and an economic GDP impact of around $55 billion per annum. There has been no significant improvement in these statistics over at least the last 5 – 10 years. Despite improvements achieved in developing and implementing sophisticated Safety Management Systems, this is not a Safety record to be proud of – we could and should be doing much better.

    To further complicate matters, we are also starting to see the concept of Safety broadening in definition and context. Though this is not yet reflected in the harmonisation process. Emerging issues such as fitness for work, obesity, diabetes, psychological happiness and wellness in the workplace are beginning to enter the conversation at various organisational and regulatory forums. Safety is less and less seen as something that we switch on and off and we go to and from work. Safety is a pervasive mindset that lives with us 24 hours a day, 7 days a week.

    Given the increasing complexity of Safety and its intersection with community, health services, welfare, and education we are becoming less clear about what is the “problem” we are trying to solve and importantly how will we know when we have solved it.

    Of course there is also the absurd situation that through harmonisation, we will have nine (9) bureaucracies (Federal Government, 6 States and 2 Territories) writing what is supposed to be identical legislation, even though not all have agreed to write the legislation in exactly the same way. The devil comes with the detail. A subtle change in wording by one authority can massively transform meaning and we are back to where we started. Common sense suggests there should be one legislative framework for both Safety and workers’ compensation. What is the argument for differing standards in Safety Management and compensation from one State or Territory to the next? We live with a legacy of Australia’s Federation. Why doesn’t common sense allow politicians to overcome State sovereignty obstacles to create a single framework ala our Industrial Relations Systems?

    Australia needs leadership in Safety. We need to encourage a debate that enables us to reflect on our current performance (both successes and failures) and to redefine what we really want to achieve and how hard we are prepared to go for it. Who will lead this discussion – our politicians? Our regulators? The business community? Or do we need a collaborative effort involving all key stakeholders perhaps similar to the German INQA model?

    1. Peter raises many important points about the direction of safety law/leadership/management in Australia, too many to discuss on a posting that is fundamentally about the costs of harmonisation.

      I certainly don\’t see Safety Leadership as being a very effective motivator to change, in isolation, as the promotion of such a concept has often been misrepresented in the past. The push for leadership would have considerably more clout if built upon the positive performance and due diligence requirements of the new harmonised laws.

      What has been missing from the harmonisation discussion are the positives in the laws. The discussion has often been distracted by the lawyers\’ perspective on what happens after an incident – penalties, disclosure, prosecutions, documents…. The requirement for all levels of management to be actively involved in safety decision making is a major benefit of harmonisation and supports the OHS principles of prevention, accountability and consultation.

      The safety leadership that I would like to see would be the CEO of a major company saying publicly that they welcome harmonisation, not only for the reduction in costs, but for the social benefits of the laws and the acknowledgement that everyone should have ownership of safety for all its social, corporate and economic benefits. Indeed there must be someone who can say publicly that their company already operates in a manner advocated by the new laws and that there is nothing to fear from these new laws. Let\’s just not hear it expressed in terms of \”zero harm\”.

      Perhaps. as an afterthought, such a statement should be made under the banner of Corporate Social Responsibility, a long-established concept that is regaining some prominence in the United States after never being applied to a corporation\’s own OHS obligations as it could have been. Perhaps the concept has existed long enough for it to have evolved from a marketing tool to a useful and a locally applicable safety management tool. But that will be for another post

  6. Examples of compliance costs (in the short term only) will be any date driven refresher training eg. HSR training to get companies up to speed with new national legislation. Once these initial learnings are integrated, for bigger businesses harmonisation should only decrease compliance costs. So the Safety Bloke is right, these changes will not break the bank however, it\’s just the logistics of re-training staff in a short amount of time that tends to create some stresses, moans and groans.

  7. Andrew\’s position is undoubhtly right.

    In the short term, the increased compliance cost will simply come from the administration and personnel needed to update existing policies and procedures to align with the new Act and Regulations. Something as simple as changeing the name of the legisaltion and cross referencing the new sections in policies and procedures will be a significant task that will require significant rescources and be a source of distraction for health and safety personnel who should be focussed on the hazards and risks in the business.

    Where existing policies and procedures rely on reference to the Australian Standards, they will need to be reviewed and updated as in most cases the Australian Standards have been removed from the regulations.

    Even something as relatively straightforward as fall protection will require policy review and re-training. The risk assesment/hierachy of control provisions of the regulations introduce new terms not previously found in some jurisdictions or industries: \”passive fall prevention device\”, \”work positining system\”. People need to be taught what these things mean as they will certainly start appearing in policy doucments, JHAs and the like.

    The new regulations also introduce more extensive documentation requirements – it is the only way to demonstrate that you have considerd the hierachy of controls required under the regulations. There is more administration in compliance with the proposed regulations – not less.

    If you want to understand the potentail complexity, deconstruct your current system and procedures for managing falls (or any other of the risks in the new Act and Regulations) and see how well it can evidence the new requirements – a classic gap analysis. Then work out what it will take to bring that process, including re-writing and training, into compliance. And mutilpy that over all of the new requirements.

    The risk arising from this sort of administative focus is not new. In a 2003 report looking at the introduction of the safety case regieme in the oil and gas industry it was identified that there were a number of concerns expressed due to the stress placed on scarce HS resources having to deal with inital and ongoing administration. These risks should not be discounted, and I have seen little evidnece to suggets that they are being acknowledged or addressed.

    Finally, I think that we should be very careful about the perceived safety benefit of these changes. The regulatory impact statement (December 2009) was quite explicit on this point, while recognising that harmonisation is a first step, it is an administrative step designed to reduce red tape for businesses that opertae in multi jurisdictions, it is not designed to improve safety. It maintains essentially the same structures as the exisiting safety legisaltion, the benefits are \”small\” and not \”readily quantifiable\”. It \”may reduce claims by half a percent\”.

  8. Where have I heard all of these \”sky is falling\” comments before … Oh, that\’s right, every time there is a proposed change to H&S legislation that imposes more responsibility on employers to provide a safe work place.

    I\’ve read the article, the comments above and the model act, regulations and codes of practice and I\’m at a loss to see where all these increased compliance costs are. What do these national legislative requirements contain that are not currently in place? Codes of practice that are admissible in court? … already in place in most states. Health and safety representatives and health and safety committees? … again, already in place in most states. And so the list goes on. If this new legislation is going to cause a river of businesses flowing into the bankruptcy court lets have some concrete examples instead of just vague claims.

  9. I agree with Brendan, that there will be a increase on cost to business and there is certainly a need to review the legislation with harmonisation. Perhap the government can have programs to support small business through the changes.

    I agree with you Kevin, a Roben style analysis would have been better structured and reviewed having professional expertise in that field.

  10. I would agree that in the short term there will be increased costs for all businesses small to large as they grapple with new requirements and inevitable changes. For smaller businesses, from my experience, compliance tends to be for compliance sake. Lack or resources and economies of scale generally dictate that economic or safety benefits are are rarely the principle motivator. The OHS Harmonisation process, by its nature tends to be friendlier, to larger national businesses who have multiple sites across multiple states who will in the medium-long run have simpler compliance systems and ongoing associated costs. Like all legislation changes, there will be winners and others that are worse off who are swept up in a broad brush approach. This may be a blue sky view, but overall, looking at the bigger picture, harmonisation is a good and necessary change for Australia. The spirit of the change should be to make Australia safer for workers and more efficient for business.

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