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Mike Blake

PMI Health Group


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Measuring the benefits of healthcare investments on the bottom line


This article was written by Mike Blake, director of PMI Health Group.

Boardroom executives are frequently unaware of the bottom line benefits of employee healthcare programmes, considering them a nice-to-have rather than a strategic necessity.

Returns on investment can be realised however and if suitable methodologies are adopted by HR departments, it is also possible for these returns to be measured and quantified.

Taking steps to calculate key metrics before and after a programme’s execution should corroborate the assertion that a healthy workforce means a healthy bottom line. This is assuming however that benefits are introduced with strategic consideration to the potential business rewards – and not simply offered to staff in an ad hoc fashion solely for remuneration purposes.

Managing the sickness absence cost burden

Perhaps the most discernible benefit arising from effective health and wellbeing initiatives are the opportunities they present for managing and controlling absence. This business cost, after all, can be considerable from paying salaries or sick pay, to replacement staffing costs – not to mention the impact on customer satisfaction and workforce morale. A 2012 CIPD study found sickness absence cost an average of £600 per employee.

Stress and mental illness is the biggest culprit of this cost burden, being responsible for more than half of all working days being lost every year. This is followed closely by musculoskeletal disorders, recognised as being the second biggest cause of sickness absence.

In both cases, treatments are being curtailed by the NHS as it looks to find £20bn of efficiency savings by 2015. Consequently, the onus is increasingly falling on companies and their HR departments to protect their business interests by exploring options to help fill the emerging gaps in state healthcare provision.

Healthcare benefits such as PMI schemes, employee assistance programmes (EAP) or cash plans will cover the cost of suitable treatments, helping to ensure employees return to health and the workplace as soon as possible.

This business cost can be calculated if robust processes for measuring absence are in place. The logical option is for automated recording systems that offer consistency in data capture.

If possible, employers should look to measure sickness absence before a healthcare programme is introduced and again when it has had the chance to impact business performance. A simple way to calculate the cost is to multiply the average daily salary bill by the total number of days a workforce as a whole is absent for each year.

Useful additional calculations, which can be done automatically by absence software programmes, include ‘lost time rate’ measuring the percentage of total time lost to absence, ‘frequency rate’ measuring the average percentage number of absences per employee and the ‘Bradford factor’ measuring the number of spells of absence.

By drilling down into the statistics, companies can identify patterns such as the prevalence of absence caused by mental or musculoskeletal illnesses, for example, and also demonstrate improvements in these key areas.

Action stations: productivity and talent tactics in the spotlight

Improvements in employees’ physical and psychological wellbeing should also realise a return through improved levels of productivity and workplace commitment.

This cause-and-effect relationship is a little more difficult to prove but it is still possible to monitor and evaluate workplace wellness interventions. Health assessment tools can be used to evaluate employee health at pre-determined intervals to see if improvements have been made. Has there been a marked reduction in smoking, for example, following introduction of a smoking cessation initiative? Employees can also be asked to assess retrospectively either their own productivity or their performance on specific tasks.

By promoting a strong sense of employee wellbeing and improvements in employees’ personal health, companies are positioning themselves as employers of choice – delivering the feel good factor, improving staff morale, motivation and commitment to help to boost recruitment and retention.

Generating compelling metrics on this may require cost assessments of comparative overtime payments and recruitment for replacement staff. Longer term analysis will also be able to illustrate variances in staff retention rates.

The benefit cost gambit

In addition, an effective healthcare strategy can result in measurable cost savings on benefits provision. It can help to keep medical premiums affordable, for example, by keeping insurance claims under control.

Where HR professionals, or their health risk consultants, analyse claim patterns or trends, they should be able to highlight where healthcare resources are best channelled.

Where a cluster of claims exist, for the treatment of bad backs for example, further investigation may reveal the need for manual handling training and occupational health advice. A quarter of all medical insurance claims relate to musculoskeletal problems but support, such as access to on-site physiotherapists for instance, can reduce time lost travelling to practitioners and offer greater convenience to employees.

In a similar vein, income protection (IP) insurers will look favourably on evidence of a fall in sickness absence rates and may offer premium reductions as a result.

With fragile economic confidence keeping the UK teetering on the brink of a triple-dip recession, companies are relying more than ever on their employees delivering sustained growth. Maintaining healthy workforces in this challenging environment is essential if this is to be achieved. Where corporate healthcare programmes have been strategically implemented, with expert advice from health risk specialists, the business case is unequivocal.

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Mike Blake


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