Employee Benefits/HSA Healthcare Research 2007

Cover%20healthcare%20research%202007Key findings
The Package
Sickness absence
Size of organisation
Sponsor’s comment: Prevention as well as cure

While employers are increasing the number of healthcare benefits being offered to staff, a fifth of our respondents do not know how much they spend on healthcare and only 5% calculate their return on investment.

While it is accepted that it is hard to accurately calculate a return on investment, employers can monitor sickness absence rates and the average length of periods of absenteeism. However, our survey shows that 52% of respondents do not even record the cost of sickness absence.

Understandably, employers’ main objective behind providing healthcare benefits is improving the health and wellbeing of their staff. Another key priority is reducing sickness absence. So it is no surprise that 59% of respondents have a strategy to reduce sickness absence. Sickness absence management schemes, employee assistance programmes and private medical insurance have been identified by employers as tools to help them with this task. But so have the softer benefits of flexible working policies and regular holidays. This ties in with the trend for employers to consider the general wellbeing of staff.

But without measuring the impact of their healthcare benefits, employers will be left in the dark to some degree.
Amanda Wilkinson Editor

Key findings

Our research was carried out in April 2007 among registered users of www.employeebenefits.co.uk, and readers of Employee Benefits. It received 933 responses from employers across the UK.

65% of respondents state that improving the health and welfare of staff is the top objective behind providing healthcare benefits.

offer private medical insurance (PMI), making it the most commonly-offered healthcare benefit.

The provision of employee assistance programmes has risen to 48%, while other types of stress counselling are now offered by 21%.

Just 5% measure the return on investment on their healthcare benefits, yet only 41% think staff understand the value of the perks they receive.

28% think employers should try to encourage staff to tackle obesity, and 59% healthy eating.

52% don’t record the cost of sickness absence

Return-to-work interviews are used by 88% of employers with a sickness absence strategy.Key findings


The Package

Increasing awareness of employee wellbeing has led to a rise in employers’ provision of alternative perks such as healthy-eating options and subsidised gyms, while stress counselling services have also become more popular, says Debbie Lovewell

Many of the healthcare benefits offered as core options remain at similar levels to last year. Private medical insurance (PMI) and workstation health audits continue to be the top two core healthcare perks, although the percentages of employers offering them has dipped slightly.

The proportion of employers offering employee assistance programmes (EAPs) – the third most commonly-offered core health-related benefit – however, has increased from 43% last year to 48%. The number of employers offering other types of stress counselling has also risen from 15% to 21%. This may be due to employers’ increasing awareness of stress as an issue affecting the workforce.

Over the past year, on-site healthy-eating options, the provision of an on-site occupational health department, a subsidised gym or sporting facilities, health screening or wellness clinics, and alternative therapies such as acupuncture or massage have all increased in popularity. This may indicate employers are increasingly keen to take preventative measures to reduce sickness absence levels and guard against some potential illnesses, often at the expense of more traditional healthcare benefits.


Overall, the proportion of employees who receive employer-paid PMI has changed little year-on-year. Just under a third (31%) of employers continue to offer the benefit to at least 81% of their workforce, if not more. Employers in the financial and IT sectors are the most likely to provide employer-paid PMI.

The fact that more than half of respondents offer PMI to over a fifth of their workforce suggests it is still seen as a valued perk. However, it is still likely to be restricted senior employees.

At the other end of the scale, just 18% don’t offer PMI to any of the workforce. This was most prevalent in the public and voluntary sectors.Many of the healthcare benefits offered as core options remain at similar levels to last year. Private medical insurance (PMI) and workstation health audits continue to be the top two core healthcare perks, although the percentages of employers offering them has dipped slightly.


Offering benefits that were traditionally core through a flexible benefits scheme can be a good way for employers to continue to make these options available to staff, while lowering the cost to the organisation.

But the proportion of employers offering private medical insurance (PMI) through flex has fallen slightly to 12%, down from 14% last year. Income protection has also dipped slightly from 8% to 7%, while critical illness insurance has remained steady at 9%. Optical benefits and personal accident have also fallen from some employers’ flex menus, both dipping to 6% from 8%.

But the popularity of health screening and wellness clinics is on the up from 7% to 10%. Traditionally, the cost of providing health screening services has meant that employers limited it to senior management. By including it in flex it can be extended to the entire workforce, and be a useful tool in early detection.


Employers’ increasing awareness of, and interest in, employee wellbeing is also reflected in the healthcare benefits they offer on a voluntary basis.

The rise in the number of employers offering on-site healthy-eating options, an on-site occupational health department, subsidised gyms or sporting facilities, health screening or wellness clinics, and alternative therapies such as acupuncture as core perks, for example, is mirrored by a corresponding dip in how often these are paid for by staff.

This is particularly evident in the case of on-site gym or sporting facilities which have fallen from 26% last year to 17%, when paid for by employees.

It appears that employers are becoming evermore aware of the advantages of looking out for employees’ general health and wellbeing, and, in many cases, are prepared to pick up the tab.

Although healthcare cash plans remain the most commonly offered healthcare perk in voluntary benefits schemes, the proportion of employers offering them on this basis has fallen from 29% last year to 24%.


PMI and income protection have experienced something of a resurgence across the board over the past 12 months after experiencing a decline during the previous year. This contrasts with the steep drop in the prevalence of healthcare cash plans and critical illness insurance at more senior levels.

This suggests a possible cost-cutting exercise may have failed to help employers achieve their aims in recruiting and retaining key senior management which tend to expect the more costly healthcare perks in their package.

The proportion of employers offering an EAP has also increased for all sections of the workforce. At senior executive level, for example, EAP provision has risen to 48%, up from just 6% last year. Half of the general workforce are now also given access to an EAP, compared with 27% last year.


When it comes to health-related benefits, employees appear to be on to a good thing. For the second year running, a significant percentage of respondents have increased the number of healthcare benefits on offer (27%), or plan to do so in the coming months (28%).

The number of staff that are covered by these perks has also risen in 12% of respondents’ organisations, while 13% say they plan to extend cover over the next 12 months. However, this is a slight drop on the percentage that said they had taken, or were going to take, the same measures last year.

National media coverage and government-backed initiatives are contributing to employers’ awareness of the advantages of investing in benefits that play a part in improving employees’ health and reducing sickness absence levels. This is probably influencing employers’ decisions to introduce healthcare benefits for the first time. According to our survey 3% have done so in the past 12 months while a further 5% plan to do so in the next year.

If cost is an issue, offering healthcare benefits through a flexible benefits scheme may be one way of making these more affordable. One tenth of respondents say they plan to offer such perks on this basis over the coming year.


Sickness absence

On the surface, short-term sickness absence seems to be decreasing but does this come at the cost of employees taking longer periods off work, asks Nick Golding

The proportion of respondents whose staff take more than 15 days off sick a year remains static at 1% for the third consecutive year.

Short-term sickness absence, meanwhile, appears to be decreasing, as 41% of respondents report their employees take less than five days off work per year, down from 46% last year. But this comes at a cost as the number of employees taking between six and 10 days absence a year has risen from 39% to 43%.

When it comes to putting a price on absence, the proportion of employers that record the cost of sickness absence to their business has fallen significantly, down from 47% to 37%. This is a continuing trend as in 2005, 51% of employers said they recorded the cost of sickness absence.

It is surprising that so many employers appear to be shying away from recording the cost of sickness absence. It may be that some prefer to bury their head in the sand and ignore the cost to the business which seems to be rising. The proportion of those recording the cost of sickness absence as between 6% and 10% of payroll has risen from 4% in 2005 to 10%, and those saying it costs between 3% and 5% has also increased from 6% in 2005 to 35%.


Once again, employers believe that work-life balance is the most effective benefit (69%) in helping to reduce sickness absence.

Employers may have realised that providing staff with the flexibility to manage their work and home life can help to reduce stress and the need to take unauthorised leave, for example, if children become ill.

But the proportion of employers attaching a value to health screening as a means of reducing sickness absence appears to have fallen from 51% in 2006 to 47% this year.

However, the percentage of employers believing that the provision of relaxation areas and break-out rooms can be effective in combating sickness absence is on the increase, with 21% of employers offering staff the chance to take time out during their day, up from 16% last year.


Stress, once again, appears to be on the rise. Having increased from 12% to 37% between 2005 and 2006, this year 40% say it is a major cause of absence. But while stress seems to be polling high numbers, it is a cyclical issue attracting a great deal of attention for some time before fading away again.

The proportion of employers registering childcare issues as a major cause of sickness absence has dropped from 24% last year to 18%. This could be due to the provision of childcare benefits such as emergency care, on-site nurseries or childcare vouchers. Such benefits help staff to put in place affordable childcare and to cope when they are let down by informal arrangements. Another reason for the shift could be employers offering staff greater flexibility around work. This is partly backed up by the reduction in the percentage of respondents who view work-life balance problems as a major cause of absence from 13% to 9%.


Healthcare%20Research%202007%20Table%2011bWith a tenth of respondents admitting that sickness absence costs their organisation between 6% and 10% of payroll each year, it is surprising that the percentage of employers which have a strategy in place to tackle the issue is continuing to fall, from 61% last year to 59%.

Employers that are looking to tackle sickness absence are putting their faith in clear policies and procedures (96%). Other strategies include taking steps to understand the reason behind employees’ absence through return-to-work interviews, offered by 88%, and the provision of absence statistics to line managers by 73%.

Some 49% also empower line managers to intervene early when staff take sick leave, with the hope of resolving the issue as soon as possible, before it becomes a long-term problem.


Even though stress remains one of the most common illnesses that keeps staff away from work, there are still only a small number of respondents that have put in place a specific strategy to cope with the problem (39%).

On the positive side, this is an improvement on last year when just 32% of respondents admitted to having such a strategy in place.

Among those that do have a stress-combating strategy, counselling has proven popular, with 83% of respondents offering their staff the chance to discuss problems with counsellors.

Employers are also increasingly turning towards line managers to help organisations cope with stress issues. More than half (53%) now report that they train managers to understand stress and how to spot the early signs among employees. Last year, less than half (47%) of respondents offered manager training around stress.

More organisations are also making use of available media tools to educate employees around the issue of stress at work. Last year, 13% said that they use booklets, video, and so on compared to the 16% that do so now.

This slight rise is possibly due to the fact that employers are now able to make greater use of methods of communication such as the internet and email as they become commonplace at work.

Another solution that can help relieve stress in the workplace is by injecting some variety into employees’ day-to-day work.

Some 10% of employers, for example, say they use job swapping as a means of combating stress, compared to 7% in 2006.

By far and away the most important factor that encourages organisations to take on stress reduction policies, is concern over staff wellbeing (91%). Although this proportion may fluctuate from year-to-year, the wellbeing of employees is always a significant issue for employers.

Healthcare%20Research%202007%20Table%2013High staff turnover also seems to be an increasing concern for employers. Although the proportion of respondents citing this as an issue dropped from 17% in 2005 to 13% in 2006, this year it has risen once again to 19%, indicating employers are realising that a stressful job is enough to encourage employees to leave an organisation.

Yet, a slightly smaller percentage of employers are concerned about the effect of stress on productivity. A quarter of employers now offer a stress reduction policy for this reason, compared with 32% last year.



Organisations seem heavily committed to improving the health and welfare of staff, as employers take a growing interest in tackling stress through the provision of healthcare benefits, says Nick Golding

Employers’ main objective behind their provision of healthcare benefits lies with improving the health and welfare of staff (65%). It is the third year in a row that improving the health and welfare of employees has topped respondents’ list of objectives in providing health-related benefits.

This just goes to show that employers have recognised the advantages to helping to keep staff fit and healthy such as avoiding potentially long and expensive bouts of sick leave and boosting the productivity of those staff who are at work.

And when employees do take time off sick, respondents appear concerned about helping staff to return to work as soon as possible, perhaps in a bid to limit the related costs.

Some 40% of employers prioritise a swift return to work when they put their healthcare benefits in place, a rise on last year’s 38%.

However, using healthcare benefits to improve recruitment by keeping up with the perks offered by competitors has dropped in popularity. While this was a key objective for 20% of respondents last year, this has now fallen to 15%.

Workplace stress remains a problem for employers this year, and the interest in reducing it through the provision of healthcare benefits illustrates this. Last year, 8% of respondents put reducing workplace stress among their top objectives when providing health benefits, compared to 10% this year.

But while musculo-skeletal problems are a significant cause of absence, just 2% target their healthcare benefits towards treating this.


There has been a gradual rise in the number of employers that are accepting some responsibility when it comes to promoting wellness among the UK population.

This year, 57% of respondents feel they are responsible for promoting wellness, a rise from 55% last year, and 49% two years ago.

It may be employers are accepting that, as they demand more from their staff in terms of an increasing workload and longer hours, perhaps they should help employees to stay healthy too.

But there appears to be some strong feeling among 68% of employers that the NHS/medical profession should take on more responsibility to promote wellness issues among staff.

However, the majority (74%) of employers still believe wellness is an issue that should be addressed by the government. This proportion has not changed over the past year.

Just under three-quarters (71%) of employers also believe that individuals should be responsible for looking after their own health and wellbeing.

Overall, it seems employers are happy to put health-related benefits in place, but feel it is not up to them to force the issue upon their staff.


With the final phase of the smoking ban due to come into effect in England next month, it is perhaps no surprise that employers are increasingly concerned about helping staff to stop the habit.

More than half (56%) of respondents now believe that employers should encourage staff to stop smoking, up from 47% last year.

A rising percentage of respondents also believe employers should encourage staff to tackle obesity in the workplace. Over a quarter (28%) believe this should be the case, up from 24% last year.

More employers are also offering their staff healthy-eating options at work, perhaps indicating that organisations feel they have some responsibility in guiding staff to make sensible nutritional choices.

This year, 59% of respondents believe they should encourage staff to eat healthily compared with 55% last year and 57% in 2005.

This could involve employers providing healthy-eating options in a staff canteen, clearly labelling foods for sale in the workplace so that staff know what they are eating, or by providing fresh fruit for their workforce.

The ever-increasing amount of media coverage focused on health and wellbeing issues may be one of the factors driving employers to place greater emphasis on employee wellness.



Despite a higher overall awareness of healthcare spending as a percentage of payroll, more than one-in-five of respondents still don’t know how much they’re committing to this area, says Debbie Lovewell

An increasing proportion of employers are able to estimate the percentage of payroll that they spend on health-related benefits. This year, more than 77% were able to put a value on the cost of providing healthcare perks for their workforce, a slight increase on last year’s 75%.

But this still leaves more than one-in-five respondents who are unable to do so, which is surprising given the rising importance of demonstrating a return on investment on benefits across the board.

The percentage of respondents providing health-related benefits for less than 1% of payroll has remained steady at 26%. Where there has been some movement is in the number spending between 1% and 2% of payroll, which has increased to 25% from 23% last year and from 17% in 2005.

Similarly, overall the proportion that outlay between 3% and 5% of payroll has fallen from 20% to 18% over the past year. This represents a significant spend, so it may be that these employers have had to seek more cost-effective options.


Cost remains the primary factor having an influence on employers’ decisions to purchase healthcare perks.

Aside from ensuring benefits remain cost effective, many employers now also expect more for their money, with 60% selecting which to purchase based on the range offered by providers. Many healthcare providers are continuing to respond to this demand by extending what is covered by products such as healthcare cash plans, employee assistance programmes and group income protection.

The need to remain competitive has risen up many employers’ agendas and is now cited as the third most important determinant in the purchase of healthcare benefits. It has leap-frogged ahead of employee demand as a factor influencing purchasing decisions, suggesting that some employers may offer healthcare perks over and above what is expected by staff if their competitors do so.


With all the lip service that is given to the importance of calculating a return on investment on benefits spend, the fact that just 5% of respondents do so around healthcare perks may initially appear surprising. Yet this low percentage has remained constant over the past year, although up from 3% in 2005.

This low proportion may be due to the fact that it can be difficult to calculate an accurate return on these products. For example, employers may find it obvious that sickness absence levels have fallen, but difficult to determine how much of this drop is due to an organisation’s health-related benefits, compared with their other complementary initiatives such as a clamp down on bogus absences.

But employers do seem to be aware of the advantages of calculating the return on their healthcare spend. More than a fifth (22%) aim to track the return on these products in the future, which is up from the 18% which last year said they would do the same.

The low percentage of employers that measure the return on investment on their organisation’s health-related benefits, however, should not be seen as an indication that respondents are indifferent to employees’ perception of the perks. If employers are investing significant sums of money in health-related benefits, they will invariably hope that they are valued and utilised by staff.

Yet less than half (41%) of respondents think that their employees understand the value of the healthcare benefits they receive. This suggests that further communication of these products is needed, particularly where employers are funding those at the more costly end of the market such as private medical insurance. Ensuring staff are aware of the value of their package will help with issues such as recruitment and retention, as well as an organisation’s image as an employer within its sector.


Healthcare%20Research%202007%20Table%2021The number of employers that use an intermediary or broker to purchase healthcare benefits has fallen over the last 12 months. Just 55% of respondents to this year’s survey say that they do so, compared with 62% last year.

The majority of respondents who source products in this way use their intermediary or broker as a means of obtaining advice.

Employing the services of an intermediary, however, can be a way of achieving some significant savings on products, particularly where they have helped an organisation to put their healthcare benefits out to tender.

Printed information remains the primary method of communicating healthcare benefits to employees. Staff can take the material away and peruse it in their own time, making decisions in consultation with their families.

Although emails are used to communicate with staff by 57% of respondents, these could overlooked if the recipient suffers from email overload. It is not surprising then that 58% of employers place information on their intranet so staff can access it as they wish. The danger here, however, is that it can be overlooked. To reach the maximum number of staff, savvy employers use a mix of communication methods.



Size of organisation

When it comes to the types of healthcare benefits that employers offer, it seems that the size of the organisation may have an impact on their choice.


Although smaller employers are often perceived to have tighter budgets to spend on benefits, organisations at this end of the scale are more often prepared to pay for some of the more costly options such as private medical insurance (PMI) and critical illness cover. Organisations with more than 10,000 employees, for example, are most likely to provide employer-paid PMI for less than 20% of their workforce. More than half (52%) of respondents of this size say that they do so.

At the other end of the scale, respondents with less than 100 staff were more likely to provide PMI to a much greater proportion of their workforce. Just under half (46%) of respondents in this group offer PMI to between 81% and 100% of their workforce, making it the most popular option among this group.

The reason for the difference in PMI provision between employers at each end of the size spectrum may be due to the effect of absence in each type of organisation. Smaller employers, for example, may feel the effect of an absent employee much more keenly as they are likely to have fewer resources to cover the role. This means it is in their best interest to help staff return to work much more quickly.

However, 29% of employers with less than 100 staff do not provide employer-paid PMI to any of their workforce, suggesting that employers of this size either take an-all-or-nothing approach, possibly due to cost constraints.


When looking at the size of organisation and the benefits on offer as part of the core package there are some differences between those favoured by employers wit