Workplace health and absence has been climbing up the political agenda for
some time and now it looks like it is going to stay. Globally, we are seeing the
burden on state welfare increasing as ageing populations place increasing
demands on health, and social provision systems. At the same time, the
government has been shifting the welfare burden onto employers. What does this
mean for business?
In the UK, despite attempts to limit access to long-term sick benefits, the
number of individuals claiming benefits has reached an all time high. In
response to this, the government is undertaking widespread welfare reform with
the key aims of improving the health of the UK by recognising the human, social
and economic impact of impaired health in relation of working here Dame Carol
Black’s ‘sicknote Britain’ serves as a current example. While short-term
activity is focussed on reducing the burden to the state, it is clear that
future impetus will be focussed on returning the long-term sick to the workplace
and ensuring those currently in work remain there. We are seeing the start of a
shift from public to private provision and inevitably there will be a key role
for the employer to play in this new environment.
Research shows how much greater the impact of absence and health management
is having than expected at the employer level. The real cost of dealing with
absence and managing the health of employees is a major, but often hidden,
expense to employers.
By better understanding the cost of healthcare and absence, employers will
be able to better focus scarce resource in the most appropriate areas, but also
drive improvements in the health of employees and hence increase productivity.
A level of absence in any organisation is acceptable and, moreover, endemic
within the system and no amount of investment will alter this. But, the reality
is that, by analysing how and where absence occurs, employers can identify how
to target investments in absence that will give the greatest rate of return.
The true cost of absence
Without the use of proper absence management tools, much absence goes
unreported. For example, many systems rely on employees to phone their line
managers who are then expected to report absences to HR a system that is not
Accurate and detailed absence management tools provide the data for
quantifying the level and profile of absence, dictating where and how resources
should be targeted.
Absence costs far more than sick pay. There are also harder to quantify costs
related to lost productivity or replacement costs. Indeed, each day of absence
equates to well over two days value to the employer. So, the true cost of
absence is likely to cost far more than accounted for and deserves more
attention from finance.
‘Prevention is better than a cure’ but while employers should quite rightly
focus on activity to keep the employees healthy it is hard to measure the
economic impact of this type of health initiative.
Measures targeted at reducing the amount of absence can be introduced
relatively quickly and the positive financial impact can be measured in a matter
of a few months. In the current climate evidencing a return on investment for
such strategies is vital. Targeting investment could be directed at the
employee, the business unit or the causation.
For example, it is clear that for certain conditions, a prompt referral to
treatment can lead to a significant improvement in recovery time. Getting
employees who are absent with, for instance, musculo-skeletal or psychological
problems, to treatment quickly will have a significant impact on absence.
For the company, it may be clear that certain units have a more critical
value to the business than others and this may lead to targeting interventions
in certain areas.
Inevitably the wider agenda will help, or force, employers to focus on the
importance of managing employee health.
In the current climate a quantifiable economic return on investment will help
employers decide where to invest. Such investment will also align with the need
for a more robust approach to corporate social responsibility especially to
the extent that it is concerned with how employers look after their own staff.
Employers may be more preoccupied with their balance sheets at the moment,
however, they must not lose sight of the significant impact that health and
absence contributes to the progress of a business.
Paul White is head of risk consulting at Aon
A new FD at a medium-sized employer in the city wanted to be able to show
evidence of the impact of absence to the business. After the initial brush off
that absence levels were consistent with peers he asked Aon to undertake a
review of the limited absence data that was available over the previous three
year period. Key facts that emerged from the data review were:
- the declared absence rate had more than doubled in this period
- a brief discussion with line managers showed that there was a significant
under-reporting of absence
These two facts alone were cause for concern and merited further examination.
Far from being under control, the cost of absence was significant and it was
deteriorating rapidly. A more in-depth analysis identified that the increase in
absence was being driven by one major factor, an increase in both the number of
days lost as a result of stress and anxiety and the duration of such absences.
The current process did allow for access to outsourced occupational health
(OH) support through the line manager. However, in attempting to control costs,
line managers were delaying the involvement of OH who, in turn, could refer to
specialist support. By the time OH were involved, long delays had already o
By reviewing the absence process Aon were able to identify early triggers for
certain conditions which reduced the duration of such absences.
Separately the organisation undertook an employee audit and line management
training to help them better identify stress in the workplace.
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