Latest news and updates on issues affecting business.

March 2017

In this issue

• Government adopts negative discount rate

• Recent HSE news and prosecutions

• UK companies' top 3 risks in 2017

• Choose bespoke cover over cheaper pre-packed policies

• Update: Gender pay gap reporting

• Half of workers don't know basic health & safety rules

Government adopts negative discount rate

On 27th February 2017, Lord Chancellor Elizabeth Truss announced a new discount rate of -0.75 percent for personal injury awards. This new rate comes into effect 20th March 2017 and was met with enthusiasm by personal injury victims and advocates, but with sharp criticism by insurers.

The Discount RateIn personal injury cases, the courts and insurance providers use a discount rate to determine the present value of the compensation that needs to be paid to an injured individual (claimant). The discount rate works under the theory that the party providing the personal injury award can discount the sum provided to the claimant by a small amount because the claimant will be able to make up the difference between the actual award and the sum provided by investing the sum.

In practice, discount rates are set to reflect small and conservative investment gains that accrue over long and low-risk investments. For example, a claimant entitled to a £1,000 claim with a 2.5 discount rate would receive a £975 sum because he or she is expected to be able to earn 2.5 percent interest a year on the sum.

The Lord Chancellor’s DecisionThe decision has proven controversial because it has changed the discount rate from 2.5 percent (adopted in 2001) to -0.75 percent. This change is drastic because it effectively requires any party paying a claim to increase - rather than discount - the sum that is provided to the claimant. The Lord Chancellor justified this decision by citing previous case law establishing that the purpose of awards for personal injury victims is to put the injured party in the financial position that he or she would have been if there had been no injury. To this end, the Lord Chancellor concluded that an accurate discount rate must represent the true and current conditions of long-term investment markets. Noting that the last discount rate calculation dated back to 2001, the Lord Chancellor determined that a rate of -0.75 percent represents an accurate discount rate for claimants in the current market.

Personal injury advocates welcomed this announcement stating that a new rate was long overdue and that it does a better job at providing financial compensation to individuals who now face long-term, if not permanent, restrictions on their ability to provide for themselves.Insurers sharply criticised the decision by stating that it has arbitrarily increased the sums they must provide to personal injury victims and will result in millions of pounds of lost profits. Insurers are expected to file an appeal to reverse this decision.

Implications for EmployersThe Association of British Insurers called the decision ‘crazy’, and estimated that it will directly increase motor and liability premiums for millions of UK drivers and businesses, including 36 million individual and commercial motor policies. PricewaterhouseCoopers warned that the average annual comprehensive motor premium will rise by up to £75 and young drivers could see increases up to £1,000. And industry experts have warned that the decision could land the already burdened NHS with an additional annual £1 billion bill.Unless an appeal is successful, businesses may see higher premiums soon.

Recent HSE news and prosecutionsHSE to make cost recovery dispute process fully independentThe HSE has announced that it will consult on proposals to make its cost recovery dispute scheme fully independent. Fee for Intervention(FFI) was introduced in October 2012 in an effort to shift the cost of regulating workplace health and safety away from the public to the businesses that break the law. Until now, a panel that consisted of two members from the HSE and one independent person considered disputes.

Construction company director imprisoned after safety failingsThe director of a construction company was imprisoned for eight months and disqualified from being a company director for seven years after he failed to take appropriate actions that resulted in a worker receiving serious burns. In its investigation, the HSE found that the director did not institute or enforce safe work practices, failed to administer first aid and did not inform the HSE of the incident.

University of Northumbria fined after botched experiment nearly kills pupilsThe University of Northumbria was fined £400,000 and ordered to pay costs of £26,468.22 after two students fell seriously ill following a laboratory experiment. As part of the experiment, two students ingested a caffeine solution, which mistakenly had 100 times the intended caffeine amount. Immediately, the students suffered from dizziness, blurred vision, vomiting, shaking and rapid heartbeat, and had to be rushed to hospital. In its investigation, the HSE found that the protocols set out for the experiment were not followed nor were they properly monitored.

UK companies’ top 3 risks in 2017Each new year brings with it a collection of challenges for businesses to overcome, and 2017 is no different. That is why your company needs to be adequately prepared for this year’s forecast, which includes digital threats and shifting economic conditions. According to a recent industry survey, the following three risks are the most significant and worrisome that UK companies of all sizes will be confronted with this year:

1. Cyber incidents: Cyber incidents once again are the top risk facing UK businesses. Last year cyber crime directly cost UK businesses about £11 billion, according to Action Fraud, whilst losses due to cyber crime coupled with cyber defence spending cost businesses more than £34 billion, according to the Centre for Economics and Business Research. What’s more is that 25 percent of all businesses and 66 percent of large businesses suffered a cyber attack last year, according to government research. Unfortunately, despite the potential damage that these attacks can cause, recent government research has shown that only half of all UK companies have taken the recommended steps to prepare for a cyber attack. Don’t be a statistic - protect your business with robust anti-virus and malware software. And remember to create a thorough employee cyber policy and procure comprehensive cyber cover.

2. Business interruptions: Whilst BIs encompass both tangible threats - such as fires and floods - and more abstract threats - such as cyber incidents and supplier failures - all have the potential to bankrupt your business or ruin your reputation. In fact, in 2016, the average BI insurance claim was nearly £2 million. To safeguard your company against potential business disruptions, you should protect yourself with BI insurance.

3. Macroeconomic developments: It has almost been a year since the Brexit vote. The decision has forced industries to reconsider how established business strategies could change in a new and shifting economic landscape. That is why it is critical to explore each facet of your organisation in order to identify new strategies and options.

In general, the more comprehensive and thorough a policy is, the more protected your business will be. Despite the security that an extensive policy can provide, only 38 percent of SMEs ranked a policy’s scope as being the top influencer when choosing a new policy, according to recent industry research. Instead, a majority of the surveyed SMEs ranked the cost of a policy as the most important factor. Whilst the cost of a policy is an important consideration, focusing solely on cost could expose your business to potential risks - such as underinsurance and unnecessary add-ons.

These potential risks are far more common if your business chooses to rely on a price comparison website to help you pick a new policy. In general, these sites offer pre-packaged policies that do not provide you with significant input on how they could be tailored to meet your business’ specific needs. That means if you choose to use one of these sites, your business is forfeiting its ability to develop a comprehensive policy that adequately addresses your business’ concerns. What’s more, is that if your business were to experience a risk not covered or inadequately covered by one of these boilerplate policies, it could end up costing your business more than what you may have saved by choosing the cheaper policy.

Choose bespoke cover over cheaper pre-packaged policies

On 28th January, the final draft of the gender pay gap regulations were published. Under the new regulations, if your company employs at least 250 staff members, you will be required to disclose the pay gap between your male and female employees. These amounts must be made publicly available on your company’s website for at least three years. However, whilst the regulations come into force on 6th April 2017, you will not have to publish your company’s findings until 30th April 2018.

But, that does not mean that your company should wait until 2018 to take any action, as you will be responsible for compiling data starting 5th April 2017. Your company should begin preparing now in order to ensure that you are able to adequately capture the following six pieces of information that you will need to include in your report:

1. The difference in the mean average of pay between male and female employees

2. The difference in the median average of pay between male and female employees

3. The difference in the mean average of bonus pay over the previous 12 months between all male and female employees that received a bonus

4. The difference in the median average of bonus pay over the previous 12 months between all male and female employees that received a bonus

5. The proportion of male and female employees who received bonus pay over the previous 12 months

6. The proportion of male and female employees in each quartile of the organisation’s pay structure

Since this information will be made available to the public, it will surely affect retention rates. For that reason, your company should act now to assess and rectify any pay disparities within your organisation.

Update: Gender pay gap reporting

According to the HSE, last year 144 employees were killed at work and 1.3 million people suffered from a work-related illness. Yet, a staggering 58 percent of employees are unfamiliar with their organisation’s health and safety (H&S) practices, according to a study conducted by international safety barrier manufacturer, A-SAFE. What’s more, 60 percent of polled employees admitted that they do not always follow all of their company’s H&S practices. This is especially troubling as a majority of the polled employees were unable to correctly identify common safety symbols displayed around their workplace.

To ensure that your employees are informed and prepared for a health and safety incident, be sure to follow these three practices:

1. Provide employees with annual, basic first-aid training. This should include what to do during common workplace injuries - such as back and head injuries - as well as warning signs of common conditions - such as poisonings, concussions and mental health problems.

2. Explain what each safety symbol and sign means. In addition, you may want to post supplemental signs in order to help clarify safety guidance.

3. Schedule quarterly fire, severe weather, intruder and injury drills in addition to regular health and safety inspections.

Half of workers don’t know basic health & safety rules

The content of this newsletter is of general interest and is not intended to apply to specific circumstances. It does not purport to be a comprehensive analysis of all matters relevant to its subject matter. The content should not, therefore, be regarded as constituting legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. Further, the law may have changed since first publication and the reader is cautioned accordingly. © 2017 Zywave, Inc. All rights reserved.

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