Buyer’s guide to Employee Assistance Programmes

Employee assistance programmes continue to develop as uncertainty around their tax status fuels slower market growth, says Sam Barrett

Employee assistance programme (EAP) providers might end up being the biggest users of their own services this year following wranglings with HM Revenue & Customs (HMRC) over the tax status of EAPs.

Services offered under an EAP that are defined as “welfare counselling” have historically been treated as exempt from tax as a benefit-in-kind. However, some employers have been hit hard by larger than expected tax bills as HMRC has questioned whether services such as legal and financial advice also qualify for this exempt status. Melvyn Measures, head of product management at provider FirstAssist, says: “There is considerable uncertainty about what this means, especially as HMRC can backdate the claim for seven years.”

It is perhaps hardly surprising, therefore, that there has been a slowdown in the market’s growth. Colin Grange, clinical director of Ceridian and immediate past chair of the British arm of the Employee Assistance Professionals Association (EAPA), a professional body for EAP practitioners, explains: “It has resulted in some organisations delaying their purchase, although I haven’t come across a single employer that has pulled their EAP as a result of the tax position.”

Although the situation has yet to be fully clarified, the industry is optimistic about the outcome. “EAPs are positioned as a benefit to the employee but their primary purpose is to improve performance in the workplace. We’re not providing legal representation or financial planning, just information that helps to reduce anxiety and helps to increase the number of employees that use the service,” adds Grange.

He explains that if an employee contacted their organisation’s EAP to ask for legal advice after being charged with drink driving, for example, they would be informed of their legal position, however, the counsellor could also provide them with support for the alcohol problem that may be affecting their performance at work.

The EAPA has put this point to HMRC and, when they last met in November, the two organisations managed to reach a greater understanding. Tony Urwin, occupational psychologist and general manager of Bupa Psychological Services and Bupa Wellness, explains: “HMRC is going to draw up a framework to highlight what is and what isn’t exempt from tax and this will be agreed by the EAPA. This has always been a grey area and this should provide the necessary clarity.”

Mike Blake, group sales manager at PMI Health Group also believes HMRC will back off. “The government seems to have conflicting objectives. On one hand, the Department for Work and Pensions is encouraging employers to look after employee welfare but, on the other hand, through [HMRC], it would be penalising the employers that do.”

Even with the issue of taxation still up in the air, the uncertainty hasn’t halted product development.

Possibly in reaction to HMRC’s views on peripheral services, a number of products have been simplified. This has reduced the cost and allowed them to be bundled together with other products such as private medical insurance and healthcare cash plans.

However, FirstAssist’s Measures warns employers against simply taking the low-cost route. “I have heard of cases where the provider drives down referral rates to reduce costs. This isn’t good if you are trying to resolve problems in the workplace, so be sure you understand what you’re buying.”

He recommends asking for details of the clinical infrastructure and going on a site visit to check out the service.

At the other end of the spectrum, providers are looking at ways of adding value by extending the role of EAPs. “Some of the more forward-thinking providers are building extras into their helplines to make them more of a service to support employees through life’s anxieties rather a service to mend them when they’re suffering from stress,” explains Blake.

Axa PPP Healthcare, for example, is looking at integrating its EAP with its wellness services. Eugene Farrell, business manager for organisational health management, explains: “We’re moving to a point where EAPs will be more linked with occupational and vocational health to deliver greater benefits. For example, we’re looking at ways to integrate the EAP with our telephone-based sickness absence management service so we can get the most appropriate interventions to employees as quickly as possible.”

Engaging employees with EAP products is now also a key consideration, and some providers are looking at how schemes are communicated to encourage interaction. Paul Avis, corporate development manager at Ceridian, says: “Services are now aiming for double-digit telephonic usage rates with even further interaction through online access, provision of post-call printed materials and CDs, downloadable PDFs and MP3 [files], podcasts, interactive workshops and webinars, and so on.”

Another key feature of the service delivered by EAPs is the management support they can offer, with many providers able to act as an extension of an organisation’s HR department. Kevin Friery, clinical director at Right CoreCare, for example, explains its largest EAP contract requires the company to spend half of its energies supporting managers. “People become managers because they’re good at their job, not because they’re good at managing people. We can help by teaching them how to deal with people. We are becoming more of an advisory service to HR, especially for issues relating to mental health in the workplace,” he says.

The broadening of the services offered by EAPs has also helped the product to extend its reach into new sectors of the market. “Many providers now offer affordable EAPs for [small and medium-sized enterprises], which appeal to employers as either part of their HR strategy or as a service where there are not HR resources,” says Avis.

So, although the EAP industry may be battling against HMRC to retain its tax-free status, there are no indications that this has distracted it from developing products that fit the demands of employers.

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Focus on facts

What are employee assistance programmes (EAPs)?
An EAP is a tool to help identify and resolve employee concerns that could affect their performance in the workplace. They are confidential and often telephone-based, although a full EAP will include access to face-to-face counselling.

Providers are also developing online services, with some also expanding into new communication technologies such as podcasts and MP3 downloads.

What are the origins of EAPs?
EAPs can be traced back to the 1920s when they were used in the US as programmes to help employers deal with drink problems among staff. They first appeared in the UK corporate arena in the 1980s where they were used chiefly in the petrochemical and finance industries but are now found in a broad range of sectors.

Where can employers get more information and advice on EAPs?
The Employee Assistance Professionals Association is the professional body for the industry, visit or call 0800 783 7616. The Association for Counselling at Work can also provide information for employers, at

In practice

What is the annual spend on EAPs?
Figures from the UK EAPA show that around 10% of the working population now have access to an EAP at a cost of £22.53m.

Which EAP providers have the biggest market share?
The largest provider is Axa PPP Healthcare, which acquired Icas earlier this year. Other top players include Right Corecare, FirstAssist, PPC Worldwide and Focus.

Which EAP providers increased their share the most over the past year?
Axa PPP Healthcare increased its market share the most in 2007, adding 900 corporate clients with 1.5 million employees to its books, following its acquisition of Icas.

Nuts and bolts

What are the costs involved?
Prices can range from £5 to £25 a year for each employee depending on factors such as the breadth of the service and the size of the organisation.

What are the legal implications?
Employers that provide access to an EAP, proactively promote it to employees and operate a system of management referral, may be considered to have exercised a duty of care towards their employees.

But following several high-profile cases, employers should not assume that simply offering an EAP is enough to protect their organisation from litigation. In the case of Intel Incorporation (UK) Limited v Daw in February 2007, however, the Court of Appeal found that the employer’s failure to safeguard Daw’s mental health could not be avoided by the provision of a counselling service alone.

What are the tax issues?
Historically, EAPs have been regarded as exempt from tax, however, the situation is currently up in the air following HM Revenue & Custom’s (HMRC) announcement last summer that EAPs should be treated as a benefit in kind if they include advice on issues such as legal and financial matters. The EAPA is in discussions with HMRC and a final decision is expected soon.