Paul Avis of Employ-Mend kick-starts a month long look at employee benefits by investigating what kind of return can be expected for a £250 investment into healthcare.
It is a fact that employers put more cash into pensions than they do into healthcare, a phenomenon and tradition that is poorly understood. Employees take the employer’s pension money when they leave and invest into something that will benefit them in 20, 30 or 40 years time but what if something were to happen tomorrow?
The point of this article is to challenge employers to think differently when it comes to funding benefits beyond basic salary, in essence to consider the immediate rather than deferred incomes and support that pensions offer. So what advantages do employers (beyond the routine acceptance of staff attraction and retention increases where celebrated) exist, as opposed to employee benefits?
For an investment of £250 an employer could receive the following benefits (costs are exclusive of VAT):
- Cash plan incorporating EAP Service: £55**
- GP 24/7 helpline: £10*
- Limited payment group income protection/PHI: £50
- One times salary group critical illness: £40**
- Outsourced absence management programme: £40*
- Employee communication & training event: £15*
- Wellness and stress screening programme: £40
** Potential P11D/Benefit in kind
Cash Plans incorporating Employee Assistance Programmes and GP helplines:
A new breed of cash plans has emerged recently targeting employer paid contributions. These include a benefit range which is geared to benefit the employer as well as the employee and can include access to Employee Assistance Programme (EAP) services.
One of the key benefits is the cash sums available to assist the fast tracking of employees through the diagnosis phase of a health problem (that is consultations and scans) where some of the NHS delays are the greatest and potentially the most harmful.
With costs starting from £1 per week and supplying upto £45 for dental and optical support, £120 for physiotherapy, acupuncture, osteopathy and chiropractic support, in addition to £200 for consultant appointments, payment of MRI, PET and CAT scans they are tremendous value for money, not least as they will help the employer reduce occupational sick pay costs which can be up to nine months for a consultant appointment and a scan if directly reliant on the NHS.
GP helplines can also be purchased for employees either as a replacement within the cash plan for the EAP or as a separate, stand alone service and this in turn may help employees to get back to work much more quickly as access to GP services can be variable.
Many cash plans also offer an EAP style service with access to helplines and up to five face to face counselling sessions. On the EAP component we would always recommend that where already in existence, a modular supplier is always better than a bundled one as the cash plans offer. However for employers to fulfil their duty of care, EAPs do offer an excellent resource in the common mental health problem and stress arenas and court case precedents illustrate some protection against litigation where they are actively promoted and used by employees. This in turn can have a positive effect on employer liability insurances (often part of a commercial combined insurance) which is coming under greater scrutiny in an era of increasing litigation and consequently prices for this insurance.
The cash plan does also help with the information, welfare and counselling/common mental health problems within the organisation but to encourage usage employers must take more responsibility for promoting it. Many employers are uncomfortable with advising staff on personal issues and this in fact outsources the welfare service of the organisation to a third party.
Retention of the EAP component in the cash plan will also lessen the potential for a P11D charge as combined with the optical component this will reduce the chargeable elements within the product. Whilst local inspectors of taxes have to be consulted in each case, many will not want to receive multiple P11D and tax returns for such a miniscule budget, even when added to the group critical illness cost – when there are non-P11D benefits in the bundled product.
Group income protection (GIP) and critical illness:
Having covered cash plans, EAPs and GP helplines, none of these benefits can be accessed unless the employee is still in the employer’s service and that is exactly what GIP achieves: salary continuance during periods of prolonged disability.
GIP is also an insurance which protects the employer from Disability Discrimination Act (DDA) (1995) litigation as most insurers now offer proactive work reintegration and rehabilitation support. As with the welfare/EAP outsourcing the GIP offers outsourced case management and DDA compliance as a result. Should it not be possible to get the employee back to work it is possible to keep the employee in service at no extra cost to the employer and this is best achieved by covering employer pension and National Insurance Contribution as well as a fixed level of salary continuation benefit such as 50% (to a maximum of 75% less the long term incapacity benefit).
Some insurers will pay for private medical treatment (without a P11D charge) if this will facilitate a return to work. Disability counselling/vocational rehabilitation services can be included by some carriers and insurers will want to provide work reintegration strategies. Only 6% of employees have this cover so it has a high impact value when properly communicated. It is also the most important employee benefit as it enables employers to retain employees in service and in the death (and private medical) scheme when most needed ensuring that contractual obligations are fully met.
Ordinarily the benefit pays out after a waiting period of 26 weeks but claim forms should be considered at day one for chronic cases, week six-eight for cases with a long prognosis and never beyond week 13 for any case so that the insurer, who has a financial motivation to get the employee back to work, acts before psychological effects supersede physical.
Whilst costs for cover to retirement can be up to 1% of salary, a limited payment plan of say two years can be less than 0.4% of salary costs and with up to 50% of claimants ceasing to claim (through death retirement or a return to work) in this period, it acts as a great buffer between full employment and ill health retirement. After the two, three or five years payments have been completed the employer can also nominate a lump sum of say one-five times annual benefit as a ‘golden goodbye’ to the absent employee which may assist in mitigating any chance of litigation.
Whilst the GIP scheme pays for prolonged periods of disability, a group critical illness scheme covers the financial consequences of an immediate scenario. For an employee who suffers one of a number of defined critical illnesses this product will pay a lump sum out after diagnosis plus 30 days, 28 weeks or 52 weeks for permanent total disability (PTD). With either a fixed amount or a multiple of earnings paid out it is a short to medium term catastrophe contract and therefore compliments the GIP scheme.
Two contract types are offered: standard where ‘core’ conditions are covered and extra where more conditions (including PTD) are included. Simply understood by employees, it has the highest take up rate in flexible benefits thereby proving the popularity. There are less than 2,000 schemes in existence currently so it is has a high perceived value and an innovative differentiator between employee benefits packages.
In addition it is useful for single employees who may not value the group life assurance contract as they have no dependants to pay the benefit to. The scheme has a pre-existing conditions clause meaning that certain conditions will be excluded from future claims. In addition the benefit attracts a P11D/benefit in kind charge as the benefits are automatically paid to the employee. Benefits could be used for a wide variance of options: from a good holiday to get over heart surgery to moving to a new home to accommodate the disability to buying a domestic dialysis machine. In all cases of chronic conditions the effect of paying a claim at this difficult time has a really positive effect on staff morale as well as overcoming any conscience issues that the employer may have about supporting employees and their families.
Employee wellness, event, benefits and service in use:
It is only recently that an integrated approach to both physical and mental health has begun to emerge in both the employee screening/’wellness’ and the new breed of outsourced sickness absence management services.
On the wellness aspect there is nothing revolutionary about these approaches but the depth and delivery mechanisms are allowing them to become much more affordable and with a greater degree of employee take-up. The ambition is to provide employees with metrics to allow them to take responsibility for their ‘total’ health and to provide employers with a summary of the health of the workforce. Employees complete a questionnaire (paper or web based) and based on their responses are provided with an initial report which highlights where they are today and where they could be with changes to lifestyle.
As the IT system is backed by clear clinical algorithms and a sound academic base, employees are engaged to act on these recommendations. Questionnaire take up from some suppliers can be 60-80% and the employer can either opt for an electronic or paper questionnaire distribution or for a licence for example on an intranet.
Key to the success is the launch and employee communications – the employer cannot be seen to force domestic/non-work lifestyle management on to employees and so the specialist firms will ensure that the message coming from the employer is the right one.
The questionnaires can range from 20 minutes to an hour and a half to complete and can cover in excess of ten areas of scrutiny for example sleep, nutrition, fitness/physical activity, alcohol, stress, body weight, smoking, mood, pain, risk behaviour etc. These in turn can be supported by EAP/telephonic or signposting support to relevant benefits for example cash plan, and service suppliers for example occupational health, and any changes in behaviour on post-questionnaire completion will result in the employee having amended reports and goals. More advanced versions can allude to disease risk management for example coronary artery disease propensity can be highlighted and acted on and recommendations to seek clinical support.
Some believe that this may lead to automatic referrals to specialists. Whilst limited by confidentiality issues and the extent to which the employer can force employees to take advice this should be viewed as a positive approach rather than an intrusive one.
For the employer a massive range of reports can become available and the impact on business performance can be assessed. Examples of this could be at a high level of effects of customer satisfaction, productivity, cost of ill health and business risk down to more detailed actions such as stress days, health fairs, corporate chillout days and work life balance programmes etc.
The ambition of the corporate purchaser is to achieve a reduction in sickness absence and staff turnover, an increase in employee morale, increased productivity, a competitive advantage, a reduction in insurance costs etc. At an individual level, employees are reputed to be characterised by a whole range of changes which can include an increase in daytime energy, improved effectiveness/performance/chances of advancement and resilience, all of which in turn provide business benefits. Returns on investment claims are not concrete at this early stage but five times seems a reasonable benchmark and some are headlining their services as ‘health as a business advantage!’
Once the corporate healthcare infrastructure is in place the next stage is to get it into use as soon as possible and hence the new breed of outsourced absence services ensures that a best practice approach on each and every absence is achieved. Employees call into a contact centre and then they are in a system designed to provide a best practice approach for all stages of the absence.
Furthermore it ensures that all of the benefits listed above act in a seamless way with the right intervention being given to the employee at the right time. In effect the organisation should be able to say what they would like to happen at any given stage of an absence and then the system will facilitate a prompt to ensure that timely interventions are managed.
The key to the systems is that there is a consistent approach to all absences and this in turn has led to 20% reductions in employer liability costs. Specifically GIP claim forms can be sent at week three/six, critical illness claim forms at day 31 or week 52 (for PTD), EAP, GP helpline and cash plans can be signposted on the initial notification call etc. Some services even provide free occupational health helplines for employers. Without such a service the expenditure above will not really work to its potential when needed.
In addition to the service provision an event is needed to launch the new employee health and wellness approaches where each modular supplier can explain what each service/benefit does. To attend the event employees should have to complete the wellness questionnaire and then be provided with supplier literature on the day. Some of the benefits will be extremely well received and, whilst they are supportive, some including the wellness questionnaire and out-sourced absence management service may be treated with suspicion. Hence it is essential that the message and delivery is right.
Whilst complex, the cost and scheme and service designs described above do guarantee all employers with a real opportunity to make a real difference to the lives of their employees. Quite simply whether you are sick, severely disabled, needing support or requiring a clinical viewpoint the employee will feel valued by the organisation. For the organisation itself, putting together an absence management report with an EAP report and an employee wellness summary is a real opportunity for an employer to really understand what the state of their workforce is and what needs to be done about it. Targeted expenditure and remedial action is just the kind of quantified argument that finance teams will want to hear – but they have to invest first to get the data to enable them to understand. And of course against many organisations’ pensions contribution this is a small price to pay!
For further details please contact Paul Avis at: [email protected]
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