Organisations are increasingly concerned with employee wellbeing, so how is it that so many fail to allocate a specific budget for it? Perhaps it is because the whole concept seems woolly and intangible. Historically, wellness programmes have often been thrown together with no clear objectives and no measurement of results.
In the current business climate, while board members are well aware of the ‘nice-to-have’ elements of wellness, the question that must be answered is: ‘Will we see a bottom-line benefit, and how will we measure it?’ It is telling that accountancy heavyweights PricewaterhouseCoopers (PwC), experts in locating unwise spending, have a manager devoted to health and fitness.
Last year, the Department of Health and the Department for Work and Pensions (DWP) released details of a study commissioned by them and carried out by PwC to determine the return on investment from wellness programmes.
The most modest figure given was a return on investment of £2.50 for every £1 spent. An earlier paper from the DWP reported that the introduction of a wellness scheme resulted in a reduction in sickness absence of between 10% and 36%. Imagine what a difference even the smallest of these changes could make to an organisation with average absence rates of 8%.
To put a figure on this, we need to define the direct cost of absence. Of course, the indirect costs are much higher (often estimated to be at least double), but these are hard to demonstrate to the board.
In addition to sick pay, direct costs should include overtime/agency fees for cover.
In the example below, you can see how much sick pay alone is costing per year for a theoretical company:
Number of employees: 1,000
Average weekly wage: £400
Sickness absence rate: 8%
Total cost of sickness per year: £1,664,000
Potential cost of scheme: £66,560, or £67 per employee
Potential savings: £166,400, or £166 per employee.
With a worst-case scenario, using the figures from the DWP reports, implementation of a wellness strategy would save just 10% of sickness absence, a reduction of £166,400.
If we use the government’s lowest return-on-investment figures of £2.50, we can see that the absolute maximum cost of this should be £66,560, or £67 per employee. It is worth noting that using the more generous figures provided by PwC and the DWP, the return could easily be £599,000, with an investment of less than £133 per capita.
Consider the additional costs of sickness absence that have not been taken into account. In addition to the direct costs of covering absence, there is the loss of continuity, reduced customer satisfaction and low staff morale that comes with the territory. Add to this the costs of staff attending work while unfit, the potential costs of litigation, and the cost of recruiting new staff when attrition rates are high, and executives and shareholders alike will begin to take note.
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Make your wellness programmes count by treating them the same as other business objectives, and help them to shed their woolly, intangible image.
Rob Woollen is corporate wellness manager for Rightway Complete Wellness Solutions. E-mail [email protected]
