Deciding whether to outsource occupational health

When deciding whether to outsource occupational health or keep it in-house, employers should consider factors such as cost, how quickly treatment is required and expertise, Sally Hamilton

Keeping an eye on the health of employees in the workplace is not only good business practice that can help improve the bottom line but, in many cases, is also a legal requirement where health and safety issues are at stake. But when deciding whether to manage occupational health services in-house or to outsource them, employers should take factors such as organisational culture and cost into consideration.

Outsourcing occupational health services is taking hold for a number of reasons including the rise in employers’ liability premiums. The manner in which sickness absence is managed is another. Outsourced services are thought to be more effective and dispassionate when it comes to getting staff back to work than those run by their colleagues.

But there are advantages of having an in-house offering, especially for employers where health and safety, and accident prevention are key issues in the workplace, such as in the manufacturing sector. An in-house team provides immediate medical help and can pinpoint potential problems because they understand the complex working environment and can identify changes in employees’ behaviour, particularly if caused by stress.

Iain Laws, head of healthcare at consultancy Gissings, says the decision to offer an in-house service is often largely dependent on scale. “There has to be a certain level of demand. It’s a cost issue. It works best for an employer with a single site with large employee density,” he says.

In-house schemes have grown largely in response to physical health problems, and increasingly weighty health and safety regulations, related to traditional blue-collar industries. But even in these sectors, outsourcing might prove more efficient, for example in construction, where staff are geographically dispersed.

Sarah Brown, senior associate at consulting firm Mercer, says outsourcing not only offers the chance of making savings but also the provision of a better service.

However, outsourcing isn’t always the right choice, warns Brown. “We focus on exactly what employers need, then decide whether in-house or outsourced is better. We typically have clients come to us who are not happy with their in-house service, [so] they may switch to outsourcing or a mix of the two.”

Outsourcing is a route that is often preferred by employers wanting to impose a tougher approach to sickness absence, which can amount to a significant and escalating business cost. Brown says: “In-house teams can be less objective with employees because they often know the people involved. They might not be as robust about getting them back to work quickly. [Whereas] outsourced services are impartial.”

Another advantage of outsourcing is the flexibility it offers employers as they are able to to contract out services as and when they want. “If you need to downsize or even open a new plant, you can rescale with an outsourced service. If you employ an in-house team you don’t have that flexibility,” says Brown.

Running an in-house team can also create problems around recruitment and training as there is a shortage of well-qualified occupational health specialists. However, Laws says: “More paternalistic employers tend to want occupational health integrated into the business.”

Wayne Pontin, sales development director of Jelf Group, adds: “There are organisations that strive to be an employer of choice by offering a complete service in-house. But increasingly they offer an internal online health advice service and perks such as gyms to improve wellbeing. They then outsource other needs such as stress counselling.”

Scottish Power values the flexibility of using both an in-house team and external contracted health practitioners to manage the needs of its 9,000 staff. Steve Deacon, group medical health and safety director at the utility firm, says: “In-house occupational health management provides the professional lead on service policy, strategy and quality assurance. In-house specialists are more aligned with the business and are better positioned to assist with the management of complex cases and situations. Routine service transactions, such as physiotherapy and counselling, are provided more cost effectively by external services.”

Consultants have mixed views as to whether outsourcing is gaining ground. While Mercer sees a trend for employers to switch from in-house schemes to outsourcing, Gissings has witnessed the reverse. Laws says: “Some companies, particularly SMEs, start by outsourcing and then decide to bring it in-house.”

So, it seems that what works best is dependent upon the needs and requirements of individual organisations.


If you read nothing else read this…

  1. Outsourcing can help organisations save money and is effective for those with staff dispersed across various sites.
  2. In-house services can throw up recruitment and training issues, but practitioners have a greater knowledge of the workforce.
  3. Outsourcing can offer constant access to qualified practitioners who can manage sickness absence more dispassionately.