Investing in employee health does deliver a return

by 07 Mar 2012

For decades organisations have associated productivity drivers primarily with plant efficiency, inventory control and human resource management. This has meant that considerations about the impact of workforce wellbeing on productivity have been seen as the poor relation. There are a number of reasons why this has occurred, and perhaps one of the principal reasons is that it has traditionally been very difficult to measure the positive impact of a healthy workforce.

More recently, factors such as increased social responsibility and an ageing workforce have influenced organisations investment in employee health and wellbeing programs, but the challenge of measuring ROI persists.

The area of workforce health encompasses a number of complex and compounding factors, which adds to the challenge of quantifying benefits and justifying related expenses. Feel good factors don’t cut the mustard in tight economic times, and organisations often see health and wellbeing programs as an area that can be cut back when the bottom line is under pressure.

The ‘Working toward Wellness’ report, published by the World Economic Forum in 2007, is one of several recent publications that are starting to support the case for investment in such programs:

‘…..the benefits from improving the general wellbeing of a workforce indicate a likely return of three to one or more…’

Tracking the cost and risk of employee ill health provides a baseline measure from which to assess return on investment in wellness. Australian companies lose an estimated $17 billion per year in productivity to absenteeism (PricewaterhouseCoopers report, Workplace Wellness in Australia, 2007), and in the US this figure rises to a staggering $74bn (The Hidden Cost of Absenteeism, C. Hall 2010), suggesting perhaps that that investment in employee health and wellbeing is a critical part of sound business strategy.

The reasons why workforce wellness is essential are often unseen, intangible and therefore difficult to quantify. Terms such as corporate image and job satisfaction are closely linked to employee wellness, and have important relevance in attracting staff in a competitive market. Recognising this, companies now frequently use mechanisms such as employee surveys in an effort to quantify and track satisfaction levels and progress towards the often identified aspiration of being “an employer of choice”.   

Absenteeism and poor staff retention are both tangible measures related to lack of employee wellness, however these factors can be “lost in translation” as they may, and quite often do, have other root causes. These might include environmental factors, poor work design, incompatible rosters and low morale, to name a few.

In addition to the disruption and ensuing cost and difficulties of recruitment, the loss of highly skilled, competent and experienced employees – often with a wealth of institutional knowledge - presents a substantial hidden cost to the employer. According to a survey conducted by Mercer Human Resources Consulting in Australia and New Zealand, about 25% of employees were planning on looking for a new job within the next 12 months and the associated cost could be equated to anything from 50% to 150% of an individual’s annual salary.  

What we also know is that the workplace has a significant and often long lasting impact on people’s health and wellbeing, and poor employee health management leads to work-related ill health, high levels of absenteeism, presenteeism and increased staff turnover. This impacts on an organisation’s profitability and makes it harder to compete with other similar organisations in a competitive marketplace.

From an individual’s perspective, work forms a very important part of our whole being and it is measurable not only in terms of physical and mental health, but in our social integration and community participation. We have considered the costs to companies of sickness and absenteeism. The social cost of complete disengagement from the workforce is a seasoned topic of debate in the political arena because of the financial and moral implications of unemployment.

In 2012, organisations that link investment in health and wellbeing to improved productivity and staff retention will most certainly be the ones to benefit from greater bottom line performance.

For the individual, it represents a point of difference in their job selection and who they regard as an employer of choice. It sends a very clear message around core values and culture - that they will genuinely be better looked after and more likely to be retained in the longer term. In the current economic climate this is a key driver for choice of employer.

For the organisation, there are meaningful and now quantifiable benefits to investing in targeted health and wellbeing programs. In addition to the benefits already discussed, organisations that are better able to target and understand the health profiles of their workforce, will in turn enjoy a measurable return on investment and a far happier and healthier workforce.

 

About the author

Mark Cassidy is the general manager of risk and innovation for online health risk software company, 2CRisk. For further information visit  www.2crisk.com.au , phone +61 1300 736 361 or e-mail info@2crisk.com.au

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