In today's tough business climate, employers and their employees must do more with less to keep their economic heads above water. One positive step in this direction is a healthier workforce, at work and more productive. But how can employers convince the C-suite of the need to promote health to gain productivity and demonstrate the risks inherent in doing nothing?
Competitive Advantage
New research published by the Integrated Benefits Institute (IBI) shows that as unemployment goes up, those still employed are more likely to adopt unhealthy behaviors such as smoking, alcohol consumption and lack of exercise. Such lifestyle-related health risks contribute to workplace absence and reduce productivity while on the job.
Fortunately, employers today appear to recognize and value health and productivity management (HPM). Instead of viewing such wellness and prevention programs as costs to be cut, a recent IBI survey of 450 employers shows that 68 percent of those with HPM programs plan to increase such resources in the next two years, and 23 percent are holding firm on their HPM investments.
However, benefits managers still must convince senior management that expending resources to improve health and productivity will provide an effective return on investment. This may be difficult, as most employers have scant data on how absence or lost time impact their bottom line
This fall, IBI took a major step to provide the necessary resources to help employers estimate, by several measures, the costs in lost productivity from incidental absence and develop effective strategies for managing absence and related health issues. IBI created three state-of-the-art, on-line lost productivity calculators to model absence-related lost-productivity costs.
Calculator Criteria
To be useful — and used — modeling tools must meet four key criteria to help employers understand the impact from lost productivity that typically results when employers ignore the impact of ill health in their workforce.
Flexibility: Employers need absence cost information for various purposes. Some simply want to know what the absence component of workers' compensation claims costs them. Others may wish to compare how their company competes with others in their industry. Employers also may want to focus on what those in a specific occupation are likely to cost in lost productivity. Meeting all of those criteria required the development of three different calculators.
The first calculator is the IBI Company-wide Lost Productivity Calculator, which models a company's overall lost productivity costs due to unscheduled absence. The second is the IBI Occupation-specific Lost Productivity Calculator, which models absence-related lost-productivity costs for specific occupation groups within a company, such as salespeople, nurses, or engineers. The third is the IBI Claimant Lost Productivity Calculator, which models absence-related lost productivity costs for a specific group of claimants with measured lost time (e.g., those receiving workers' compensation, paid time off, salary continuation, or short-term disability).
The on-line report includes a user's absence-related lost-productivity costs, costs per full-time equivalent (FTE), a tailored absence multiplier, alternative lost-productivity estimates users may adopt to reflect their own benefits plan, and bottom-line implications.
Accessibility: Employers often throw up their hands when it comes to quantifying the true costs of absence because few models track lost time in a form and format accessible to benefits managers or even the C-suite. IBI resolved this problem by requiring only a few, generally available data elements: industry and company type; number of FTEs; payroll and benefits; lost workdays; and major occupational groupings. Corporate-level revenue and earnings also are required for the company-wide calculator. The calculators provide alternatives when some of that information is not be available. If, for example, an employer does not know the occupation mix within the company, the payroll or actual worker lost time, the calculators insert research-based default values, which a user may alter to tailor estimates for a missing value.
Credibility: To monetize lost-time to lost-productivity, the calculators use an occupation-specific, peer-reviewed methodology developed through an analysis of data from 800 employers by Sean Nicholson, PhD of Cornell and Mark Pauly, PhD, of the Wharton School. IBI worked with Dr. Nicholson to create all three calculators. Absence-related financial lost-productivity (or "opportunity costs") reflects the extent to which companies facing absence can readily replace workers, the degree to which absent employees work in teams, and how quickly the employer can sell all that it produces.
Affordability: The calculators are available free to any employer who is an IBI employer member or requests a one-year, no-cost IBI membership. The calculators also are offered to IBI supplier members to use with clients to help them demonstrate the bottom-line costs of incidental absence.
Next Steps
Employers are likely to be surprised when they review results from the calculators. Research co-authored by IBI and published last spring in the Journal of Environmental and Occupational Medicine shows that the lost productivity costs for participating employers are large — they averaged 2.3 times the medical and drug expenses for the 27 common chronic conditions in that study, which combined lost productivity and medical claims costs. For some conditions, that ratio was as much as 20:1.
William Molmen is the co-founder and general counsel of Integrated Benefits Institute, a non-profit entity that provides benefits performance research and analysis, measurement, practical solutions, and forums for information and education on health-related workforce productivity. More information is available at www.ibiweb.org.
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