Wellness Strategies Positively Effect Firms’ Bottom Lines

December 22, 2011 (PLANSPONSOR.com) – Employers are increasing their investment in the health and work effectiveness of their employees.

A Towers Watson/National Business Group on Health study finds employers are finding this strengthened commitment — evidenced by a philosophy and programs that make employees accountable for managing and improving their own health — can have positive effects on their organization and bottom line.  

The North American Staying@Work research shows a strong link between highly effective health and productivity strategies and strong human capital and financial results. For example, nearly two-thirds of companies with highly effective health and productivity programs (66%) report they perform better than their top competitors, versus 50% of companies with ineffective programs.   

In other key findings, high-effectiveness companies report: 

  • Market premiums that are 18 percentage points higher than for low-effectiveness companies; and 
  • Industry-adjusted average revenues per employee that are 40% higher than for low-effectiveness companies, a difference of $132,000 per employee. 

The study report says successful strategies can provide these organizations other significant advantages over low-effectiveness companies.   

They report: 

  • A differential in annual healthcare costs of more than $1,000 per employee among U.S. respondents — which gives a company with 20,000 employees a $20 million cost advantage over low-effectiveness companies; 
  • An annual healthcare cost differential of $551 per employee among Canadian respondents; 
  • Fewer lost days due to unplanned absences and disability — which, when combined with savings on healthcare costs, can increase a typical company’s benefit savings by considerably more than 30%; and 
  • Reductions in at least some health risks (tobacco use and sedentary lifestyles/physical inactivity), as well as lower voluntary turnover rates. 

Almost all U.S. (89%) and Canadian (87%) respondents say health and productivity is a core component of their organizational health strategy. Spending on health management programs in the U.S. has grown 50% over the past two years.  

The vast majority of U.S. respondents say healthcare reform either has had no impact on the importance of health and productivity improvement (62%) to their organizations or has actually increased its importance (35%). Virtually all respondents expect their organization’s support of health and productivity programs to increase over the next two years.

What Fuels the Drive for Employee Wellness  

Continuing investment in health and productivity improvement programs is fueled by concerns about the rising cost of employee illness and time away from work, according to the Towers Watson/National Business Group on Health North American Staying@Work research. Medical cost increases remain high. What’s more, outlays related to downsizing and pressures to do more with less are also on the rise.  

Health and productivity costs totaled nearly 27% of payroll in the U.S. and 17% in Canada — a 22% increase from 2005 levels in the U.S. and an increase in Canada of 8% from just two years ago.  

Overtime costs as a percentage of payroll increased by nearly 70% in the U.S. from 2009 to 2011. The cost of replacement workers in Canada doubled over the last two years from 1.2% to 2.4% of payroll.  

Another factor driving the wellness push is that the prolonged period of uncertainty and economic instability most organizations have been experiencing can take a serious toll on employees — in the form of stress-related physical and psychological illness, absence from work and presenteeism.  

Employers are increasingly alert to the issues and are taking action. However, many of those trying to solve the problem have little confidence that their efforts are succeeding.  

Nearly nine out of 10 survey respondents in the U.S. and Canada report excessive workloads and long hours as a top source of employee stress; the percentage of Canadian respondents reporting this type of stress jumped 25 percentage points, from 64% in 2009 to 89% in the last two years. Significantly more employers are taking action this year to address specific causes of employee stress — particularly work/life balance (63% in the U.S. and 67% in Canada), lack of supervisor support (61% and 64%) and inadequate staffing (58% and 60%).  

Although action is more prevalent, success is not. For example, just over half (51%) of U.S. respondents said their efforts to address employee stress caused by inadequate staffing have had little or no positive impact. Similar numbers of both U.S. and Canadian respondents say their efforts to mitigate the impact of technology-driven 24/7 availability have had little or no positive effect.  

The complete study report can be downloaded from http://www.towerswatson.com/united-states/research/6031.