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Keep business healthy, wealthy and wise

Maintaining a healthy workforce and keeping absenteeism at bay come at a price. But, as the boom in the corporate health and fitness sector proves, companies are discovering that for long-term gains, it is money well spent.

Austerity is a double bind for business. Headlines confirm that shedding people is the quickest way to reduce costs. But equally, organisations are under pressure to retain skilled staff in a competitive job market. Motivation, health and well-being are increasingly important factors in hanging on to a prime quality workforce. However, they come at a price.

This is reflected by a boom in the corporate health and fitness sector which, according to business consultancy Burlington, will be worth £65m by 2004; a forecast based on a significant anticipated rise in the number of major contracts to provide in-house health and fitness facilities.

But there is still a long way to go.

The Confederation of British Industry says that despite the increase in implementation of employee assistance programmes (EAPs) – generally phone-based counselling services that may cover health, finance, drugs and alcohol, relationship problems, stress and bullying, for example – just 30% of British employees benefit from some kind of mental or physical well-being development strategy.

According to research carried out recently for the Health & Safety Executive, almost 700 million working days a year are lost to physical (musculoskeletal) ailments. A further 6.5 million days are wiped out by stress.

Ed Radkiewicz, chief executive of Businesshealth, which specialises in helping its customers to turn staff health into a business advantage, estimates that health-related absence costs the UK £450 per year, per employee, of which almost half is modifiable by a focused programme that covers everything from job perception and dissatisfaction to physical fitness and smoking.

‘The prospect of financial outlay is a major inhibitor,’ he says. ‘But there’s also the risk factor. Managers wonder if they’ll be opening a can of worms. If they know there is a stress problem but they keep quiet, maybe it will go away. And then much of the theory is new and unproven. They ask why they should be the first to commit to such a programme when nobody else seems to be.’

But evidence is accumulating. Prior to implementing an EAP, insurance company Direct Line was spending £4,500 per employee annually on staff turnover costs. Absenteeism was costing a further £1,100 per employee.

The company contracted Businesshealth to identify, analyse and report on the reasons: lack of recognition through personal and career development, failures in the recruitment process and, particularly among junior employees, the struggle for an appropriate work/life balance.

As a result of the programme, employee turnover started to fall, with a 5% swing generating savings of £150,000 in direct payroll costs. For every £1 spent on the programme, which initially covered a pilot group of 600 staff, savings of £9 were made through staff retention.

Benefits of this type of programme aren’t confined to the private sector.

There is also evidence of their success among more cynical public sector bodies. For example, the City of York education department recently implemented an EAP for its primary school workforce.

Alongside improved morale and performance, absence was reduced across the board by almost 2% (a cost saving of £43,200) and in a single school, £5 was saved for every £1 spent on the programme, reducing overall costs by £58,800.

Radkiewicz says that employers should expect to pay up to £40 per employee per annum for a full EAP. And as long as general counselling services are provided, an EAP doesn’t count as a benefit-in-kind for employees, so should attract tax relief on all elements of the programme.

The same still doesn’t apply to conventional fitness schemes. Last year, Fred Turok, chief executive of LA Fitness, which offers corporate health club programmes, confronted prime minister Tony Blair with a prediction of spiralling treatment costs and billions of pounds in lost revenue if issues surrounding the fitness of the national workforce are not tackled.

He suggested tax breaks on club membership for individuals and tax benefits for companies that offer employees health club membership, claiming that countries like France and the Netherlands are already stealing the march with investment in employee health. A year later, nothing has changed.

Stephen Mathers, finance director at Bladerunner, a supplier of bespoke corporate fitness solutions and services, points out that many organisations avoid the overhead – as much as £100,000 for a fully equipped gym – by outsourcing the whole programme, from gym construction to ongoing management and the provision of a full range of associated professional services which might include alternative therapies, hairdressers, and even dental and clinical services.

And this makes more sense in an increasingly litigious culture where the wisdom of simply turning spare office space into an unsupervised gym could prove a false economy.

‘Each organisation is different,’ he says. ‘Some won’t want to charge a fee as a way of attracting as many staff as possible to join. Others want it to be self-funded. Either way, the benefits – staff retention, reduced absenteeism, motivation – are quick to accrue. The finance manager is the hard nut to crack but investment tends to be a board decision. The main limit we encounter these days is space.’

Technology company 3Com recently upgraded its fitness centre at Hemel Hempstead, and boosted membership to 50% of employees as a result. ‘We charge a membership fee so we can provide the service at no cost to the company,’ says Karen Oddey, executive vice-president of marketing and business strategy.

‘And we see the results in more effective employees who enjoy developing their skills base. Gym-goers are certainly less lethargic at the end of the day when they’re likely to be making business calls to California.’

Royal & Sun Alliance charges its staff £10 per month to join the Bladerunner-managed gym at its City premises, housed in a disused computer room. Former chief executive Paul Spencer says that in some ways the intangible benefits to the company are the most important.

‘Where you have large numbers of staff in call centres, processing centres and administrative departments, all sitting at desks, you need to make work something more: a lifestyle in itself, part of their lives where they feel good,’ he says. You start to get a culture and an atmosphere that is healthy in all aspects – how we treat each other, and our customers, and how we feel. And all those things add up to just being a little bit different to the next company.’

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The Ethical Employee, a survey of 1,050 people by The Work Foundation and The Future Foundation, shows companies can improve their chances of hiring and keeping talented staff if they are supportive of employees’ home needs and pay more attention to environmental and community concerns.

The research found around 10% of the workforce are ‘ethical enthusiasts’, who hold such strong views on corporate social responsibility that it is likely to influence their choice of employer. Ethical enthusiasts are more likely to be young people (18-24) and older people (45 and over).

A further 10% of the workforce marries self-sacrifice with self-interest.

As well as corporate ethics, this group looks for an employer with employment practices that come under the umbrella of good corporate citizenship – such as flexible working arrangements, compassionate approaches to illness and family crises.

The research also found employers without a good record on corporate ethics are more likely to lose staff over the next 12 months. A third of all employees are very likely to be job hunting in the next 12 months because their employers have a poor record on corporate social responsibility.

This is particularly true of ethical employees. Over half (53%) who rate their employer as below par on its contribution to the community say they are fairly, very or extremely likely to leave within 12 months.

  • Source: The Work Foundation, which continues the tradition set by The Industrial Society to improve the quality of working life in the UK. The survey was published in December.

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