The economic slowdown means organisations are looking at ways to cut the cost of health and wellbeing benefits while still caring for their staff, says Tom Washington
Identifying how to provide attractive perks within a budget is an essential skill for any benefits professionals to master when it comes to recruiting and retaining talent, especially if increasing salaries is out of the question.
It pays to invest in health and wellbeing benefits as they go down well with staff, but they also enable employers to tackle fitness and stress levels, thereby improving productivity and reducing sickness absence.
However, in an economic downturn, benefits experts may be asked to keep an even closer eye on costs when it comes to providing competitive health and wellbeing benefits. Steve Desborough, senior consultant at Watson Wyatt, says there has been a change in employers' approach to providing healthcare perks for staff in recent months, with many more now looking for ways of saving money. "Even companies that use consultancy firms are starting to talk about costs rather than simply getting the best value for money," he says.
It will require employers to take an imaginative approach when it comes to providing benefits on a budget, so that when the economic storm has passed staff will still be engaged and motivated, and not disillusioned by any cutbacks they have seen. Richard Halley, head of B2B sales at HSA, explains: "If employers look after employees during difficult times, they should find that commitment paid back later."
Desborough agrees, and adds that providing good health and wellbeing benefits is no small matter. "There is more stress in the workplace, increased pressure on the work-life balance and therefore more onus on employers to provide the right benefits," he says.
According to the Employee Benefits/HSA healthcare research 2008, 89% of employers rank cost as the number one factor when it comes to the decision to purchase healthcare benefits. Iain Laws, account director at consultancy Enrich, says: "Companies are reviewing expenditure that is likely to increase. When you look at health benefits cost increases, they are well above inflation. Employers [that] want to maintain their current benefits provision are either cutting costs or at least trying to prevent further rises."
The price of private medical insurance (PMI) can start at £300 a year per employee, but annual increases have traditionally run ahead of other measures of inflation such as retail prices or earnings. Medical cost inflation shows no sign of slowing and is now running at close to 10% a year. Therefore, employers that offer PMI may face yet more budgeting in the annual task of negotiating premiums and funding levels with insurers.
Removing PMI completely from a benefits package is often not an option, so there are several methods employers can consider to reduce costs. Damian Lenihan, head of client management at Bupa, says: "There are cost-effective ways of providing PMI schemes. It is all about how employers communicate with their staff."
One strategy is to implement a high excess charge. This way, employees must fork out for the first portion of any healthcare costs, a tactic which may also reduce claims. Mike Blake, group compliance director at PMI Health Group, says: "This is a claims control measure that affects premiums and can keep a scheme sustainable."
Another option is to reduce a plan's geographical coverage, restricting where employees can be treated to a shorter list of hospitals. This effectively guarantees each site more patients, giving insurers more bargaining power when it comes to negotiating lower bills.
Alternatively, employers could review how they offer the perk to staff. For example, offering healthcare benefits through a flexible benefits scheme shifts responsibility for future cost increases onto employees.
Changes can also be made to the structure of other benefits such as group income protection schemes. Providing a limited-term policy can reduce the expense, for example.
Helene Gullen, commercial marketing manager at Unum, explains: "While employers want to provide a safety net for their staff, many cannot afford to offer 75% of salary to age 65 [years]. We have seen an increase in the number of [organisations] moving to limited-term benefits, with many employers choosing to limit their payouts to two, three or five years."
However, if an employer is perceived to be reducing the value of an existing scheme, this may not be viewed favourably by staff.
Cash plans
Employers that do not already provide healthcare perks for staff and wish to do so despite being on a budget, could consider offering healthcare cash plans as a cost-effective way of providing employees with cover for everyday healthcare issues. These cost from 75 pence per employee per week.
Halley says there has been a growth in the number of both employer-funded and employee-paid cash plans. "Employers are starting to look for more value for money. When times are tight, they can use the schemes to ensure their budget covers their whole workforce. This is something employees value and can see tangible benefits from on a regular basis," he says.
Although cash plans are not a direct substitute for PMI, they can cover employees' basic healthcare needs. Karl Elliott, marketing director at cash plan provider Engage Mutual, explains: "Whether it is eye tests or physiotherapy, these schemes allow people to get quick, cost-effective treatment and therefore get back to work faster."
Sue Weir, chief executive at Medicash, adds: "If employers want to keep a cap on their costs, cash plans are a way of offering employees genuine value while not incurring a huge percentage increase in payroll costs."
Employers can also offer benefits on a budget that can help tackle stress and other mental health issues.
Lenihan believes that providing an employee assistance programme (EAP) is one way of helping staff through tough times. "There are relatively cheap ways to put EAPs in place. For example, if an organisation is going through a lot of changes it may want to support its employees by providing them with a way to talk about their problems," he says.
Low-cost versions of EAPs or similar counselling services start with simply offering a telephone helpline for staff to call for confidential help and advice. More expensive schemes offer face-to-face counselling sessions, arranged by the provider, in addition to helplines.
Return on investment
Gullen believes EAPs can save money by increasing employee productivity. "An EAP can help staff with tasks such as sourcing childcare or finding nursing homes. This frees up time for employees to get on with their work. It also provides important management information to help justify the cost," she says.
EAPs are increasingly being integrated into other health and wellbeing packages. For example, Unum includes an EAP within its group income protection policy at no extra cost to the employer.
Organisations can also offer a number of budget wellbeing options to help prevent staff from developing certain health problems. Jessica Colling, product director at Vielife, believes this should be a priority. "Prevention is better than cure, and much cheaper for employers," she says.
Providing fresh fruit to stop staff snacking on chocolate and crisps, offering healthy-eating options in the canteen or negotiating discounts on gym membership are all easy, cheap ideas. Colling adds it is not necessary to spend big to see a return on investment. "If employers cannot afford to provide gym membership, simply encouraging staff to do more physical activity is a good start. Ensure staff take lunch breaks and go for walks, and put posters in the lifts to encourage them to take the stairs," she says.
Laws adds: "You have to invest in a prevention programme before you see the results, and often it's the organisations that think most carefully about their budgets that take the most active approach to this."
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Healthcare on a budget: top tips
- Communicate Make sure employers value and understand the health and wellbeing benefits that are being provided, by communicating them fully.
Case Study: Tameside Metropolitan Borough Council†
Tameside Metropolitan Borough Council introduced a wellbeing strategy seven years ago in a bid to reduce high absence levels among its 9,000 employees.
Mick Forrest, assistant director, people and performance, explains: "We did not want to take the traditional route to handle the problem. We looked at how we could stop employees being off in the first place, and make them feel better about themselves." The council initially launched a pilot engagement programme with approximately 1,000 employees in partnership with Vielife, focusing on hydration. Water bottles were given to staff and drinks stations installed in all rooms to encourage staff to drink water rather than tea or coffee. 'Pee charts' were also installed in toilets to enable staff to gauge how hydrated they were, depending on the colour of their urine.
"The scheme caught peoples' imagination. It was cheap to do and everyone saw the benefit of being more hydrated," says Forrest.
Since the launch, the council has added a number of other cost-effective options to the programme including an urban walks scheme, which suggests short walks for staff to take during the day, free fruit in the office and poster campaigns to encourage the use of stairs rather than the lift.
Forrest adds that the scheme has resulted in a number of advantages for the organisation. "We have seen annual absence levels fall by three days per employee. The benefits pay for themselves," he says.
Case Study: Runnymede Borough Council†
Runnymede Borough Council switched from providing private medical insurance (PMI) to staff who had been with the organisation three years, to a healthcare cash plan for 500 employees after finding the increasing cost of PMI too much to handle.
The council now pays for a cash plan for all employees once they have reached three years' service, at a cost of £15 a month per employee.
David Thomas, personnel manager, says: "The idea was to provide a cost-effective way of helping staff to beat the costs of medical expenses. It [is] also used as part of our recruitment package." He adds that many employees choose to pay for the benefit, provided by HSA, until they become eligible for employer funding. Staff can also top up the scheme to enhance the level of cover or to extend it to their families.
"We believe access to affordable healthcare is of the utmost importance when it comes to supporting the wellbeing of employees. All local councils are having to look at their finances as money is tight," adds Thomas.