Buyer’s guide to employee assistance programmes (January 2010)

It is a good time to strike a cheaper deal for an employee assistance programme, but employers must make sure they are getting the services they require, says Sam Barrett

Prices are tumbling in the employee assistance programme (EAP) market. As providers team up with insurers to offer freebie EAPs and the product becomes more commoditised, employers are benefiting from cheap deals.

James Bradley, director of service delivery at Employee Advisory Resource, says: “Employers on long-term contracts are getting a shock when they go to market. We saw an organisation recently that had not rebroked for 10 years. It was paying £35 a year per employee for a top-of-the-range EAP and it is now paying less than £10 per employee.”

It is also possible for employers to get their hands on a free EAP as some insurers offer these as added-value benefits. Among those providing ‘free’ EAPs are group income protection providers Unum, which links up with Ceridian, and Canada Life, which works with FirstAssist.

James Kendrick, practice leader of the healthcare consulting practice at Hewitt Associates, says: “These free services are useful, but be careful because they are not as comprehensive as standard EAPs. Employers will usually get fewer face-to-face counselling sessions and they also forfeit some of the management information.

This can be a particularly useful tool as it helps determine which other healthcare initiatives could be most effective.”

Tax status

Clarification from HM Revenue and Customs on the tax status of EAPs has also had an effect on price. The guidance, which came out in December 2008, stated that as long as an EAP was not provided for employees’ dependants, unless for an issue affecting the employee, and it did not include in-depth financial or legal advice, then it would be considered tax-free.

“A lot of providers had to rethink their product offering,” explains Bradley. “To remain a tax-free benefit, where legal or financial advice was provided, this has had to be scaled back to give employees more of a signposting service.

This has resulted in some price reductions.” Because of this, product development has really taken off in the past year. While some employers are happy with a straightforward service that comes with a cheap, or non-existent, price tag, EAPs are also beginning to be integrated with other health and wellbeing benefits.

Melvyn Measures, head of product at First Assist, says: “We are seeing demand from employers that want to put together a bespoke programme, including occupational health services such as screening, remote case management and rehabilitation, as well as their absence management programmes. This can make them a much more effective tool for dealing with workplace issues.”

Broader benefits

Rather than pushing the price of their product, some providers are also focusing on the broader benefits an EAP can provide. Wolfgang Siedl, executive director of The Validium Group, says: “We look to have a strategic position with the employer. This will involve much more engagement with the organisation, so any employee problems are identified and dealt with quickly.

We are not the cheapest, but we aim to get three times the usage of a plan that costs half the price, so we do deliver value.” The internet is playing a bigger part in delivering EAPs, too. James Slater, project and product director at Ceridian Lifeworks, says: “There is a trend towards more online usage, with staff looking for information online before picking up the phone to call the helpline.”

As well as issue-related information, websites are also offering health-assessment tools and wellbeing advice, says Slater.

Some counselling is also moving online and several models are in use, including live chat as well as email-based counselling, and packages designed to support other forms of counselling. But take-up of these services remains relatively low and Measures believes the case for online counselling is still to be proven. “Online cognitive behavioural therapy can add value, particularly when combined with telephone or face-to-face counselling, but I do not think it is so effective on its own,” he says.

SME market

However, one area that is coming online faster is the small and medium-sized enterprise (SME) market. With their set running costs, SMEs were not regarded as profitable for providers, but this is changing. David Smith, secretary of the Employee Assistance Professionals Association (EAPA), says: “Providers are developing EAPs specifically for SMEs by pooling the risk so the overheads are not so high. I have seen a scheme with as few as four employees.”

As well as small company provision, some EAP providers are being asked to take a broader view. Eugene Farrell, business manager at Axa Icas and chairman of the EAPA, says: “We are seeing the multinationals demanding more international services so they can provide a uniform EAP to their employees around the world.”

However, not every provider can do this because the UK model of EAP provision does not necessarily fit into local cultures around the world. “We have teamed up with local providers, as well as other parts of Axa, to provide an international service,” says Farrell.

With pressure on price as well as demand for bigger services, the EAP market is likely to change in the next 12 months. Some movement has already happened, with Icas being bought by Axa and, in November, PPC Worldwide merging with Optum Health. Many expect this trend to continue. “I expect we will see more big healthcare providers pushing into this market either through acquisition or by working with an EAP provider,” says Slater. “There is also likely to be some consolidation among the smaller providers as a result of pricing pressure.”

Against this backdrop, prices and products are likely to shift, says Hewitt’s Kendrick. “Some providers are differentiating their products from the freebies by adding extra health services. This trend will continue through 2010.”

Focus on facts

What are employee assistance programmes?
EAPs are confidential worksite-based programmes designed to support employers and employees with work and personal problems. These issues could include relationships, legal, health, alcohol, bullying at work, worklife balance and stress. All EAPs include a 24-hour telephone line, and most also provide access to face-to-face counselling where necessary. As well as helping employees with their problems, many EAPs also support employers. This could be in the form of telephone support for line managers and HR departments or management information to help employers identify where to target their health initiatives.

What are the origins of EAPs?
EAPs originate from the US, where they were introduced to help employers tackle drug and alcohol abuse among staff. They first appeared in the UK in the 1980s.

Where can employers get more information and advice on EAPs?
The Employee Assistance Professionals Association can help if employers are looking for more information. Its website ( has details of providers and consultants, as well as information on what is happening in the market

In practice

What is the annual spend on EAPs?
According to the EAPA, 5,200 organisations had an EAP in 2008. This covers about 8.2 million staff and represents an annual spend of £50.6 million.

Which EAP providers have the biggest market share?
Precise details on market share are not available, but the largest providers include Axa Icas, PPC Worldwide, Employee Advisory Resource and Ceridian.

Which providers increased their share most over the past year?
Again, it is difficult to get a definitive answer, but among the contenders are Ceridian and PPC Worldwide.

Nuts and bolts

What are the costs involved?
Price depends on the size of an organisation, with larger firms benefiting from lower prices, and, in some cases, the industry sector. For instance, a housing association or financial services organisation might pay more than an employer in the retail sector because usage is higher. For a full EAP, employers can expect to pay between £6 and £12 a year per employee.

What are the legal implications?
Although EAPs shot to fame when they were mentioned in a 2002 Court of Appeal ruling as a means of protecting against being sued by stressed employees, the situation was clarified in 2007 when judges said that, on its own, an EAP was not enough to show an employer was safeguarding employees’ mental health.

What are the tax issues?
EAPs are not taxable unless their remit goes beyond that laid out by HM Revenue and Customs. So, if it includes helpline provision for employees’ dependants, or extensive legal or financial advice, the taxman might regard the whole EAP as a benefit-in-kind and tax it accordingly.