It’s a disturbing trend: Americans seem to be getting less healthy with every passing year. According to the Economist, health premiums in America have more than doubled in the past decade. The proportion of adults who are clinically obese more than doubled between 1980 and 2010, to over 30%. This year, healthcare spending hit historically high levels as a share of GDP, and according to government projections, annual health spending is expected to grow an average of 5.8% during the period of 2014 through 2024.
Self-insured employers bear the brunt of these high costs. Human resources consulting firm Aon Hewitt estimated that per-employee health costs exceeded $11,000 this year. Given the rapidly rising costs, it’s understandable that businesses everywhere are seeking innovative ways to nudge employees toward healthier behaviors that will in turn have a positive impact on the company bottom line.
How can investing in employee wellbeing today help your bottom line?
According to a recent survey by PwC of companies with more than 5,000 workers, over 88% reported having some sort of employee wellness program. Fidelity found in their annual health care survey that 95% of companies plan to offer some kind of health improvement program for their employees, and the percentage of companies offering incentives to participate in these initiatives has increased from 57% in 2009 to 74% in 2014. While many companies have already initiated a program of some sort, you may be looking for more concrete reasons why employee wellness investments are worth it - or not.
So why might your company need a comprehensive employee wellbeing program? There are many reasons, but these are the ones that matter most: The physical and mental wellbeing of employees are the key factors in determining productivity, worker retention, healthcare costs and company profits. Let’s look at each of these factors and their associated costs to your business, with respect to both the physical and mental health of your employees.
1. The treatment costs of physical chronic disease are killing your bottom line
You probably know that obesity and diabetes are on the rise, but you may not be aware of how dramatic the associated costs can be. The estimated annual medical cost of obesity in the U.S. was $147 billion in 2008 U.S. dollars; the medical costs for people who are obese were $1,429 higher than those of normal weight. Obesity increases workers’ compensation costs. A 2007 study found that obese workers file twice the number of workers’ compensation claims, had seven times higher medical costs from the claims, and lost 13 times more days of work from work injury or work illness than other workers. Diabetes is another rising health risk for workers, and expensive for employers. Annually, an employee with diabetes will cost $13, 243 on average, while an employee without diabetes costs only $2,560 on average. Total health care and related costs for the treatment of diabetes run about $174 billion annually.
While the incidence of smoking has gone down over the years, it’s still worth mentioning in this context. According to the CDC, 40 million American adults still smoke. Workers who smoke cost the US an estimated $278 billion annually in lost productivity and extra healthcare costs. Healthcare costs to employers for smokers are about $2,056 per year more than the costs for nonsmokers.
Less often in the spotlight but still significant when considering treatment cost to employers is the usually-invisible issue of chronic physical pain. Chronic pain affects more than 116 million U.S. residents and, according to the Institute of Medicine, costs up to $635 billion a year in medical treatment and lost productivity--much of which cost is borne by employers. Workers’ compensation claims are rising due to the prevalence of chronic pain.
2. The costs of absenteeism, low morale and low productivity are killing your bottom line
Many studies have shown that employees with lower levels of fitness and health miss more days of work than their healthier co-workers. A Gallup poll reported that employees who said they were overweight or obese with three or more chronic conditions recorded over 3 “unhealthy” days per month--an average of 42 days per year, totalling $81 billion in lost profits. The Center for Disease Control and Prevention also states that healthier employees are less likely to call in sick.
Even worse, those less-physically-fit employees tend to produce less than their counterparts on the days when they are in the office. Workers who devote time to regular physical exercise are able to accomplish more in the same amount of time, and report feeling more productive in general. A Swedish study published in the Journal of Occupational and Environmental Medicine concluded that workers who exercised reported having a greater capacity for work, greater productivity, and were sick less often.
Many traditional employee wellbeing programs focus on physical fitness and exercise, which is a great start, but the mental fitness of your workers is just as important. Clinical depression is just one of many potential mental illnesses and personal issues that may affect your employees, but it’s a big one: The World Health Organization estimates over 350 million people afflicted with depression, making it the leading cause of disability worldwide. Depression is also linked with unhealthy stress - and health care expenditures are nearly 50% greater for workers who report high levels of stress.
According to the Depression Center at the University of Michigan, depression costs employers over $44 billion annually in lost productivity, 81% due to poorer on-the-job performance. The same source also notes that the cost of depression to employers in lost work days is as great or greater than the cost of many other common physical medical conditions, including heart disease and diabetes!
3. Healthy, happy employees stay put--avoiding more costs that could kill your bottom line
Given the evidence, it’s clear that the physical fitness and mental state of workers has a huge impact on the health and productivity of a business as a whole. What might not be as immediately obvious is the role those things play in employee retention.
Some studies estimate that replacing a salaried employee costs 6 to 9 months’ salary on average. For a manager making $40,000 a year, that's $20,000 to $30,000 in recruiting and training expenses. Some studies estimate twice as much, depending on position and industry. It’s evident that retaining employees for the long term is best for profits, so the right question to ask is, do wellbeing programs contribute to keeping your best employees?
Recent evidence points to a resounding Yes. Employees do want, and often have come to expect, wellbeing programs and institutional support for healthier lifestyles.
A majority of workers in the US and Canada report feeling their company could do more to encourage and support them on their path to a healthier lifestyle. According to the Principal Financial Well-Being Index, employees actively want and request fitness programs, and eight management support. Nearly half of employees report that having an employer sponsored wellness program would encourage them to stay in their current job longer, a figure that continues to rise from survey to survey. Employee Benefits News reports that a company is four times more likely to lose talent if its employees have an unfavorable view of its wellness efforts. When wellbeing is a priority, employees are 3.5 times more likely to say they are being encouraged to be creative and innovative.
A CareerBuilder.com survey found the top 2 most-requested employee perks were half-day Fridays, and an on-site fitness center. That tells us loud and clear that employees are extremely concerned with their health and their everyday quality of life. More than fancy titles or big offices, they truly seem to want support for a flexible and healthy lifestyle. Rosemary Hefner, vice president of HR at CareerBuilder, says, “Being compensated well will always be a top consideration, but we’re seeing work-life balance, telecommuting options and learning opportunities outweigh other job factors when an employee decides whether to stay with an organization.”
4. Healthy, happy employees increase your profit margin
Last but definitely not least, healthy employees simply cost less to employ. Study after study confirms that this is the case, but here are a few highlights that will help convince you that employee wellness is a major factor in financial outlay from employers.
According to a 2014 study conducted with hundreds of subjects by the University of Warwick, employees who consider themselves happy are a solid 12% more productive.
Conclusion: Investing in holistic wellbeing just makes sense
Regardless of the size of your business, you and your employees stand to benefit from an increased focus on employee health and happiness, for all the reasons outlined above. Large businesses will have more complexities to navigate with regard to legalities, implementation and awareness-building, but also have the most to gain from making employee wellbeing programs available to employees. As we’ve seen, research supports the inclusion of both physical and mental programs in a well-balanced wellbeing program.