Employee Benefits/HSA Healthcare Research 2008
Sponsor's comment by HSA: Employers need to follow through on healthy intentions
Benefits practitioners are likely to be forced to justify their expenditure on healthcare perks over the next few months as organisations tighten their belts to deal with the credit crunch and a deteriorating economy.
However, our annual research into healthcare benefits shows that at least a quarter (26%) of employers do not know what they spend on healthcare and only 6% calculate the return on investment for their healthcare spend. This seems short-sighted because 53% of respondents spend more than 1% of payroll costs on health-related perks.
Cutting absence rates is one obvious way of delivering a return on investment on healthcare perks. Absence not only leads to extra costs, such as staff cover, but it also has a negative impact on productivity. Other ways of demonstrating the value of healthcare perks include measuring employee satisfaction with their benefits or by monitoring recruitment and retention rates.†
There is hope that more employers will take a closer interest in accounting for their healthcare spend, as 27% of respondents say they are planning to calculate the return on their investment. But actions speak louder than words and benefits professionals will need to arm themselves with relevant statistics in the coming months if they are to safeguard their healthcare spend and even create a business case for exploring further health and wellbeing initiatives.
Amanda Wilkinson Editor
Our healthcare research, which was carried out in April 2008 among registered users of www.employeebenefits.co.uk and readers of Employee Benefits magazine, received 502 responses from employers across the UK.
Just over three-quarters (76%) of employers believe that absence management schemes help to tackle absence, but 50% of respondents don't record the cost of sickness absence.
Nearly two-thirds (65%) of respondents have a strategy in place to reduce absence.
Just under half (45%) of respondents claim employees take on average less than five days off sick a year.
30% of employers have increased the number of health benefits they offer in the last 12 months, while 28% plan to do so in the next 12 months.
Private medical insurance (PMI) continues to be the most popular core benefit, offered by 56% of respondents.
74% of employers know the cost of their healthcare benefits, but only 6% calculate the return on investment from their spend.
27% of respondents have not heard of the Welfare Reform Act.
59% of respondents believe it is the responsibility of employers to promote wellness to the UK population
Despite the uncertainty surrounding the tax issues behind employee assistance programmes (EAPs), the percentage of employers offering the perk as part of a core package has risen year on year, says Nicola Sullivan
There are changes afoot in the popularity among employers of some core healthcare benefits. While private medical insurance for employees remains the most popular option according to this annual survey of employers' healthcare provision, with a slight increase in the percentage of respondents offering the perk year on year, the status of employee assistance programmes (EAPs) has risen significantly.
Despite the uncertainty surrounding the tax treatment of employee assistance programmes over the past year, the perk is the second most commonly-offered core healthcare benefit this year having been ranked in third place last year. In 2006, 43% of respondents offered an EAP, 48% in 2007 and now 54% do so.
Additional types of stress counselling, which are not offered through an EAP, are now also offered by an increasing proportion of employers. Just under a quarter (24%) now offer this as a core perk, compared with 21% last year and 15% in 2006. It is possible that some employers may have sought an alternative to EAPs, following the recent uncertainty around how the benefit is taxed.
The popularity of group income protection also appears to be on the rise, the perk having remained fairly static for the last couple of years. This year, the benefit has moved into third place with 52% of respondents offering the perk, compared with 41% last year.
The popularity of optical benefits has also undergone significant growth. A third of respondents now offer optical care as core, compared with 23% last year and 22% in 2006.
Offering perks that have traditionally been provided on a core basis through a flexible benefits scheme can be a good way of helping an employer to lower the cost of providing these to the organisation. It can also enable an employer to extend these benefits to employees' dependants, which can be highly valued by staff. It is perhaps little surprise, therefore, that private medical insurance for employees' dependants is the top benefit offered in this way by respondents.
A similar percentage of employers also offer dental insurance, critical illness insurance and personal accident insurance to dependants as they do to employees.
Despite the uncertainty surrounding HM Revenue and Customs' position on the taxation of health screening, the popularity of the benefit along with well woman and well man clinics, when offered through flexible benefits schemes, does not appear to have waned over the past year.
Enabling employees to extend the coverage of healthcare benefits to their dependants can help to provide staff with peace of mind. Offering such benefits on a voluntary basis means employers can use their bulk-buying power to secure discounts for staff, but the cost is covered by employees. It may come as little surprise, therefore, that the top healthcare benefits offered through a voluntary scheme are private medical insurance and healthcare cash plans for employees' dependents, provided by 35% and 25% of respondents respectively.
The number of employers that offer dental insurance has continued to rise steadily. In 2006, a fifth of respondents offered the perk through a voluntary benefits plan, which 24% now do for employees and their dependants.
A number of options, however, have experienced a slight dip in popularity, including income protection, health screening, health cover through a health trust, and workstation health audits. This is mirrored by a rise in the percentage of respondents providing these on a core basis, suggesting employers are becoming more aware of the advantages of staff wellbeing.
The past year has seen a great deal of uncertainty around how employee assistance programmes (EAPs) and health screening benefits should be taxed. With final decisions on each yet to be made, it appears that employers are far from rushing to make adjustments to their EAP's, with 40% of respondents waiting for a decision to be made on whether plans that offer financial and legal advice will be subject to tax before taking any action. Just 1% have limited an EAP purely to health-related advice.
When it comes to what to do with regards to health screening, which may be subject to tax if bosses do not fund it for all staff, 13% are waiting for a decision to be made, while 2% have extended the coverage of employer-paid screening. Just 1% have removed health screening for the percentage of staff who had received it.
However, 19% say they are unaware of or haven't considered the tax situation for either perk.
Employers appear to be taking a greater interest in looking after the health and wellbeing of employees, with 30% of respondents having increased the number of health benefits they offer over the past year. A further 28%, meanwhile, are planning to do the same over the next 12 months. More employees are also benefiting from healthcare perks as 18% of employers have extended coverage to a greater number of staff, which is more than the 13% which said they planned to do so in last year's survey. These moves may partly be in response to government pressure on employers to take on more responsibility for staff health and wellbeing, for example, as proposed in Dame Carol Black's review published in March.
Some 16% plan to increase the number of employees covered by healthcare benefits.
Increasingly, respondents appear to be putting a strategy in place to tackle absence, as well as recording the cost of staff being off, says Nicola Sullivan
Employers appear to be experiencing a higher number of short-term absences, with 45% of employees taking less than five days a year, which is an increase of 10% on last year.
When it comes to longer-term absences, however, only 4% of staff take between 11 and 15 days, which is a slight improvement on last year's 5%.
Sickness absence can be a significant cost on an organisation's balance sheet, so it is perhaps surprising that just 42% record this cost, although this is an improvement on the 37% that did so last year. Of those employers that do record the cost of absence to their business, 41% say that it costs between 1% and 2% of payroll. The percentage recording the cost as between 3% and 5% has fallen slightly to 31% from 35% last year.
Employers seem to have had a change of heart about which benefits are most effective at reducing absenteeism, with just over three-quarters (76%) citing absence management schemes as the best solution. This represents a 15% increase year-on-year, placing the benefit as the most effective at tackling absence, bumping work-life balance policies into second place after two years at the top.
Regular holidays and flexible working, which remain in third and fourth place respectively, have also risen slightly in popularity year on year. After falling away slightly last year, the percentage of employers attaching value to health screening as a means of reducing absence has increased from 47% in 2007 to 54%, placing it back on a similar level to 2006 when 51% said it had an impact. Private medical insurance and EAPs also remain popular.
Minor ailments remain the main cause of sickness absence, although the percentage of respondents recording it as an issue has risen from 78% last year to 87%. The proportion of respondents citing stress as a main cause of absence has risen for the third year in a row. This year, there has been an 18% increase. Despite this trend, however, musculo-skeletal problems, which have increased to 50%, up from 39% last year, have overtaken stress as the second most likely reason for absence.
Employees' caring responsibilities also appear to be an increasing problem for employers. The percentage of respondents citing childcare as a contributory factor to absence has risen from 10% in 2005 to 24%.
A larger percentage of employers also appear to be experiencing staff absence as a result of employees caring for elderly or disabled adults. This year, 6% say it is a main cause of absence, compared with 3% in 2006. One way of tackling this is to offer flexible working.
Although stress is cited as a major cause of sickness absence by 47% of respondents, the number that have a strategy in place to cope with the problem has fallen slightly to 37% from 39% last year. This is, however, a rise from the 32% that operated such a strategy in 2006.
Among those employers that do have a specific stress strategy in place, 89% offer counselling through an employee assistance programme. Flexible working and work-life balance policies are seen as effective ways to combat stress by 82% of employers, while 79% ensure policies on bullying and harassment exist to protect employees from undue stress caused by other colleagues.
Employers are also more likely to equip line managers to deal with the problem, teaching them how to look for signs of stress and take the appropriate action to deal with it. This is achieved through workshops and training sessions for senior staff, which are provided by 58% of respondents, up from 47% in 2006.
Employers also appear to be aware of the benefits to be gained from teaching employees how to handle stress themselves. This year, there has been an increase in the number of respondents that provide workshops and training sessions for employees. Some 36% now offer these services, which is up from 33% in 2006 and 31% last year. Job swapping or matching, adopted by 11% of respondents, is also used by employers to combat stress by making sure staff have greater variety in the tasks they do at work.
Encouragingly, concern for staff wellbeing remains by far the most important factor behind employers' decision to implement a stress strategy. This is followed by high sickness absence figures, as cited by 37%.
The percentage of employers that appear to fear legal claims from staff, however, has continued to fall for the second year running. Just 26% say it is now a concern, down from 35% last year and 39% in 2006. A greater proportion of 31% have concerns about productivity. This figure has risen from 25% in 2007 and is on a par with 2006 when 32% said it was an issue.
It is encouraging that the percentage of respondents which have a strategy in place to tackle sickness absence has begun to rise, after falling for several years. Nearly two-thirds (65%) now have such a strategy in place, compared with 59% last year and 61% in 2006.
Employers looking to cut absence levels still believe that clear policies and procedures, and return-to-work interviews are the best way to go about this, which remains fairly static year-on-year. Other popular strategies include disciplinary procedures, as offered by 71%, giving absence statistics to line managers, which is provided by 69% and offering rehabilitation to staff on long-term sick leave (56%).
The proportion of respondents believing that employers have a responsibility to promote wellness to employees has risen, while improving the health and welfare of staff is the main reason for providing perks, says Amanda Wilkinson
Promoting health and wellbeing among the British population is rising in importance among employers. A fit and healthy workforce means absence is minimised and productivity optimised.
More than half of respondents (59%) believe it is the responsibility of employers to promote wellness, compared with 49% in 2005. However, 76% of respondents believe that primary responsibility for promoting wellness in the UK rests with the medical profession, followed by the government (75%) and then the individual (70%). This represents a shift from the previous three years when respondents said the government was primarily responsible.
When employers were asked to select their top three objectives in providing healthcare benefits, improving the health and wellbeing of staff came out on top. Reducing sickness absence was the second most important priority, with 42% of respondents citing this as an objective. These, along with the objectives of getting employees back to work as soon as possible, being perceived as an employer of choice and being seen as a 'caring' employer have remained in the same order of priority since 2005.
However, controlling costs has fallen in importance and is now cited as an objective by 11% of employers, compared with 19% in 2005. Improving staff retention and improving recruitment by keeping up with the benefits offered by competitors have risen in importance from 8% and 3% respectively in 2005 to 18% and 14%. As objectives, reducing stress and cutting musculo-skeletal problems, hold similar levels of importance to previous years.
When it comes to employers' responsibilities, 89% of respondents believe that they should first and foremost encourage their employees to maintain a sensible balance between their work and home lives.
In part, this may be due to an awareness of the necessity to guard against stress in the workplace and to comply with employers' duty of care obligations under health and safety legislation. In fact, 70% of respondents believe that employers should encourage staff to reduce their stress levels.
Overall, there is little change in employers' attitudes to encouraging staff to change their behaviour year on year. Just over half of respondents believe employers should encourage staff to keep fit and to eat healthily, both factors which affect productivity and absence levels.
The Welfare Reform Act 2007, which is due to come into effect this October, is intended to reduce the number of people claiming incapacity benefits by tightening up eligibility and encouraging them back into the workplace.
The government is expecting employers to become more actively involved in rehabilitating staff back into the workplace. However, 27% of respondents have not heard of the Act and 19% believe that it will have no impact on their healthcare benefits.
Some employers are considering making changes to their benefits policies in response to the legislation. Almost a third (29%) of respondents say that they are looking into promoting the benefits they offer to staff to ensure they know what is on offer, while 23% are reviewing their rehabilitation programme and 5% think they will have to introduce one.
Some employers (15%) also think they will have to review income protection cover or introduce early intervention mechanisms (13%)
Despite the increasing need to justify benefits expenditure, a quarter of respondents do not know what they spend on health perks, while just a tiny proportion calculate their return on investment, says Amanda Wilkinson
Almost three-quarters of respondents (74%) are able to estimate how much the healthcare benefits they offer are costing their organisation. This figure has remained fairly static over the last two years. However, with an increasing emphasis on human resources being more accountable, it is surprising that a quarter of respondents do not have any idea of how much is being spent on healthcare benefits. Only just over a quarter (27%) of respondents spend more than 2% of payroll on healthcare perks, while 47% spend 2% or less.
With the economy looking bleak, many benefits practitioners may be forced by their finance directors to justify the return on investment (ROI) from their healthcare spend.
However, there could be many red faces if they are asked to do so as only 6% of respondents currently measure ROI. Worryingly, this figure has hardly shifted from 2006 when it was 5%.
Nevertheless, 27% claim they are planning to calculate ROI, compared with 18% two years ago. These good intentions, however, have yet to translate into any real action, which may be due to the difficulty in linking workforce trends directly due to the provision of healthcare perks.
Of those respondents that do measure their ROI from healthcare spend, most do so by analysing sickness absence levels (85%) and by monitoring employee engagement or satisfaction levels (75%).
Unsurprisingly, cost is the main factor that influences respondents' healthcare purchasing decisions. This is followed by the range of benefits offered by a provider, a factor having more of an impact on larger employers. This is perhaps because providers are more willing to offer extra services to larger employers in a bid to win their business. Employers are also influenced by the need to remain competitive (42%). However, only a quarter appear to pay regard to legal concerns, an area which is of particular relevance around stress management.
The proportion of employers using intermediaries or brokers to help them purchase healthcare benefits has remained pretty static over the last three years.
If the bleak economic outlook continues then this figure may rise as employers decide to rebroker insurance perks in a bid to keep healthcare costs under control.
The bulk (79%) of respondents using intermediaries do so for strategic advice and purchasing negotiations, while almost a fifth (19%) do so only to buy particular products.
Given the large sums of money spent on healthcare perks, many employers would hope that they are valued by their staff.
However, just over half (52%) of respondents do not believe that employees within their organisation appreciate the value of the healthcare benefits provided to them. This sentiment is strongest among those working in organisations employing 1,000 or more.
This will, in part, be due to a lack of effective communication of the details of healthcare benefits to employees. The majority of respondents use printed information (71%), the intranet (65%) and emails (61%) to convey the extent of the perks on offer.
Although figures for 2008 show a slight decrease year-on-year in the percentage of top-level staff who receive private medical insurance (PMI), senior executives or boardlevel staff are still the most likely group to receive it as a benefit. However, PMI is increasingly being provided to different levels of employees.
This trend has developed over the last two years, with 51% of respondents’ general workforce receiving the benefit in 2008, compared with 46% in 2007 and 20% in 2006. This could be due to the increased popularity of flexible benefits, as well as employers’ greater focus on staff health and sickness absence. As is perhaps to be expected, larger organisations are more likely to make PMI more accessible to a higher percentage of their workforce.
However, employers are making savings on critical illness insurance, which is being offered to fewer higher-level staff.
The proportion that offer employee assistance programmes (EAPs) as a benefit to middle management and above has increased slightly while the benefit has been made significantly more widely available for the general workforce.
Healthcare cash plans have fallen slightly in popularity for all employees, particularly for senior executives and managers, suggesting that despite market growth and increased demand from the corporate sector, cash plans continue to remain a more popular choice for the wider general workforce.
A greater percentage of organisations’ workforces can expect to receive private medical insurance (PMI) this year, with 40%of employers providing the benefit to between 81%and 100% of staff, compared with 31% in 2007. Employers in the financial services sector are most likely to offer employer-paid PMI.
At the other end of the scale, just 16% of employers do not offer the paid perk to any staff. Public and voluntary sector organisations, constrained by tighter budgets, tend not to stump up the cash for PMI.
But where employers make PMI available at a cost to the employee, just over a quarter (26%) say that up to 20% of their workforce takes it up.
Employers need to follow through on healthy intentions
This is the fifth year HSA has supported Employee Benefits magazine on this annual healthcare survey, and a reflection on a half decade of results shows an interesting trend. Each year, respondents claim they plan to increase the health benefits offered to employees, yet the percentage of those actually offering health benefits has remained virtually static. Perhaps employers therefore need to follow through with their healthy intentions.
Despite claims that organisations have, and will, increase benefits, the level of perks offered have remained virtually the same, whether provided as a core, flexible or voluntary benefit. For three years in a row, 28% of you have responded claiming that you plan to increase the number of health benefits over the next 12 months. In fact, this year, 30% of you have claimed to have already increased the number of benefits on offer at your organisations over the past year.
Employee assistance programmes (EAPs) are a clear winner, with 31% offering an EAP in 2004 rising to 54% in 2008. This indicates that the uncertainty around the tax status of EAPs has not impacted on attitudes towards the benefit. In fact, less than 1% of you have limited your EAP provision to merely health-related advice as a result of questions around the tax exemption of these helplines.
So why are employers holding back? Especially since 64% of you believe that private medical insurance reduces sickness absence and 54% think that health screening helps with this.
Cost appears to be a big factor. When asked what influences respondents to choose healthcare, cost is the main influencer (83%), followed by the range of benefits offered by the provider, stated by 62%.
Employers are advised to look at simple and affordable health options, but also those that offer a range of benefits that truly meet the needs of their organisation. And, according to the survey, the top three drivers for providing health benefits for organisations are: improving health and welfare of employees, reducing sickness absence and getting staff back to work. And, with around half of respondents citing that musculo-skeletal problems and stress are two of the main causes of ill health from work, employers need to look at benefits that truly help tackle these areas.
Many health plans are now available that can help solve this issue. WorkWell from HSA, for example, is affordable, starting from only £7 per employee per month and covers check-ups, treatment and emergencies for your employees. It includes wellbeing benefits, which help with staff welfare. As well as making employees feel more valued, these help with recruitment and retention.
There are also other benefits that can help with the key causes of ill health from work. For tackling stress, for example, which 47% of respondents believe is a key cause of absence, health plans such as WorkWell include an EAP. To help get staff back to work from ill health, there are consultants, diagnosis and occupational health benefits which can help find out what is wrong, while treatments delivered by physiotherapists, chiropractors and osteopaths can help put employees back on the road to recovery, especially from those all-important back and spinal injuries.
Glenn Rhodes, Head of B2B Marketing, HSA
For more intormation visit www.hsa.co.uk†
The views and opinions in this article are those of our sponsor, HSA, and do not necessarily reflect those of www.employeebenefits.co.uk.