Curbing illness a core business priority

Oct 30 2007 by Nic Paton Print This Article

Spiralling sickness absence rates among America's ageing workforce mean that improving the health of the workforce is changing from being a nice-to-have "add on" to a core business priority.

Research by HR consultancy Mercer has found that improving the health of the workforce is becoming a "must have" rather than a "nice to have" for a growing number of managers.

The shift is being prompted by stubbornly high sickness absence rates among the country's ageing workforce, with the amount of time workers take off, and the bill for treatment, continuing to rise.

Its survey of more than 600 US employers, carried out with its insurance broker business Marsh, found eight out of 10 either agreeing or agreeing strongly that improving employee health had become a core business value.

"It comes down to maintaining productivity as well as managing health care cost," said Sue Willette, head of Mercer's health and productivity management group.

"It's clear that if your employees are not at work – or are at work but not 100 per cent healthy – productivity suffers," she added.

The Mercer/Marsh survey found that, for a sizable minority of employers, absences are continuing to rise.

Nearly a quarter of the employers polled said the incidence of short-term disability claims rose between 2005 and 2006, and 15 per cent saw an increase in the average length of the disability period.

Around a tenth reported a decrease in short-term disability incidence. For two thirds, absence rates stayed about the same, despite efforts to manage them more effectively.

The conditions cited most frequently as being in the top three in terms of cost were cancer and cardiovascular disease (54 per cent), other musculoskeletal conditions (53 per cent) and low back pain (42 per cent).

Of the eight common disabling conditions, the poll reported employers as seeing more and/or more costly claims for cancer (47 per cent) and stress/depression (44 per cent), along with other musculoskeletal disorders (39 per cent), cardiovascular (38 per cent) and low back pain (28 per cent).

Yet there was also a recognition that substantial financial benefits could be gained through maintaining and promoting a healthier workforce.

Health benefits now cost the equivalent of about 16 per cent of payroll, while the cost of absence programmes together equalled four per cent of payroll.

On top of these direct costs were the hidden costs of absence – the cost of replacement labour and loss of productivity, estimated to equal about three per cent of annual payroll.

In some industries, the impact of absences on productivity could be much greater, it added.

In the health-care industry, for example, workflow problems caused by absent or underperforming staff could often led to issues with quality of care and greater liability exposure, said Mercer.

"Altogether, employers are looking at cost of nearly a quarter of payroll for health and absence programs and health-related productivity losses. These costs are related, but until recently employers have managed them separately," said Willette.

The result was that more employers, particularly larger ones, were committing significant investment to health management as a way to address spiralling health benefit costs, said Mercer.

About a fifth had integrated their healthcare and disability programmes. Among employers with 10,000 or more employees, a total of six per cent now required employees off with a short-term disability to participate in any relevant disease or health modification programmes they offered.

Another four per cent offered an incentive to do so. An additional 14 per cent were also planning to implement one of these approaches within the next year; with four out of 10 considering doing so.

"Employees on short-term disability are typically generating big health care claims, so these are the people you most want to utilise your health and disease management programmes," said Willette.

The increase in stress-related absence, depression and other behavioural health disorders had also prompted more employers to integrate their employee assistance programmes into their disability and health management programmes.

When asked about the primary objectives of their health management programmes, nearly all the employers polled cited controlling healthcare costs.

But more than half also said improving overall employee productivity was an objective.


Older Comments

The problem is that companies try to operate at maximum efficiency. This means having the fewest number of workers to get the job done (i.e., avoid redundancy), the least amount of leave allowable, the maximum working time they can get out of employees. This is called 'being competitive in a global workplace'. The problem is that 'peak efficiency' exists only for a narrow set of constraints. Should the conditions fall outside of these constraints, then, the costs are no longer optimal. Companies, in their efforts to be 'cost-effective' may sometimes ignore real possibilities when their operating conditions are no longer as efficient.

As an example, take 'just-in-time' production. While there are no disruptions in the labour force, transportation/distribution, supply, it is indeed the most efficient production mechanism, since you cut out many of the overhead costs. The problem is that in the real world, it is not realistic to expect, over a long enough period, for these assumptions to hold. Sooner or later planes crash (distribution), there are labour disruptions (strikes/staffing shortages), suppliers go broke and an alternative, equivalent source must be found. Therefore, over the long term, the 'most efficient' solution may not be in fact always the most efficient.