There was a time, not too long ago, when employee wellness programs were viewed primarily as a recruitment tool, as a perk to help attract and retain talent. Programs such as employer-sponsored health club memberships, cholesterol screenings and smoking cessation counseling were generally perceived as worthwhile investments for those companies who could afford it, particularly during the talent wars of the mid to late ’90s. A body of research, however, has emerged in recent years that suggest employee wellness programs have a positive and wide-reaching impact on a number of bottom-line issues, everything from lowering absenteeism to a reduction in health care claims. This new evidence paired with the steady rise of health care costs has cast employee wellness in a new light. More and more companies are viewing investments in their employees’ health as a way to manage costs and this is a most welcome development.

A recent American Management Association study found that more companies are promoting wellness among their employees. The AMA surveyed members and customers at 211 companies and found that the number of organizations offering educational programs on self-care topics had gone up among all seven areas examined:

  • Smoking cessation
  • Exercise and fitness
  • Nutrition
  • Blood-pressure management
  • Weight management
  • Stress management
  • Cholesterol management

In addition, more than three times as many respondents reported an increase in wellness programs at their firms as those who reported a decrease.

This development indicates a shift in how companies’ are thinking about investments in employees’ well-being. There has always been a tacit understanding that investments in physical capital such as equipment or systems will entail spending additional dollars for upkeep and maintenance. Only recently organizations have begun to recognize that attending to the physical and emotional needs of their human resources makes good business sense.

Today’s companies are running leaner and meaner with fewer employees being asked to produce more. This rise in expectations has been accompanied by an increase in job-related stress and a reduction in down time while encouraging a number of unhealthy habits, from sedentary lifestyles to smoking to an increased consumption of fast foods. Between 1980 and 2000, U.S. obesity rates doubled and they continue to rise. Chronic, degenerative conditions such as heart disease and diabetes are also on the rise. And the declining health of the American workforce is fueling an ever growing health care crisis as employers struggle to keep up with escalating premiums.

It is this last issue of health care costs that poses perhaps the most daunting challenge to today’s small and midsized employer. Consider the following:

  • According to the Kaiser Family Foundation’s 2004 “Employer Health Benefits” survey, the premiums charged for job-based health insurance rose by 11.2 percent in 2003, exceeding previous rates of growth. All types of health plans – including HMOs, PPOs, and POSs – demonstrated double-digit increases in cost.
  • According to the National Coalition on Health Care, health insurance premiums will rise to an average of more than $14,500 for family coverage by 2006.
  • According to a 2004 New York Times article, employee benefits are the second-largest structural cost after corporate income taxes for American manufacturers, adding 5.8 percent to costs.

Unfortunately, many companies have addressed this issue by placing a greater burden on their employees. In fact, the Kaiser Family Foundation study found that more than 80 percent of companies with 200 or more workers reported they were very or somewhat likely to increase the amount paid directly by their employees for health care in 2004. And there is little evidence suggesting that trend will abate in 2005.

The health insurance crisis is escalating at a time when the job market is heating up and a restless workforce is becoming increasingly anxious to switch jobs. Multiple studies have recently revealed that as many as 50 percent of employees intend to look for new opportunities in 2005. According to a survey conducted by the Society for Human Resource Management and, 38 percent of HR professionals have noticed an increase in turnover since the beginning of 2004.

Today’s jobseekers are weighing potential employers’ health insurance as part of their decision-making. In fact, a recent study by Deloitte and the International Society of Certified Employee Benefit Specialists found that recruitment and retention is now the No. 2 priority of benefits specialists behind controlling health care costs. Thus, the challenge for today’s companies is reconciling cost control with competing for talent.

A considerable body of research suggests that employee wellness may be the best way to balance these competing interests. For example, a 21-year study of wellness programs by the University of Michigan Health Management Research Center found that comprehensive year-round health programs yielded cost savings of $3 for every $1 spent. Additionally, fitness programs yielded a variety of benefits, including lower absenteeism, reduced workplace stress levels and improved employee morale.

These savings should come as little surprise. For example, Blue Cross and Blue Shield of North Carolina recently discovered that their obese members incurred health care costs of at least 30 percent more than their normal-weight members. Thus, an effective weight management program has the potential to yield considerable savings in the form of reduced claims.

There is an old saying that we often use around the office to describe those organizations that focus on short-term, bottom-line numbers rather than investing in their workers. They are “penny wise and pound foolish.” We use this in reference to companies who unnecessarily incur costs related to turnover, absenteeism and inefficiency because they skimp on investments in their human capital, and it is wholly appropriate regarding the issue of employee wellness. Reducing benefits or shifting a greater cost burden for health care to the workforce before trying to control costs by other means is counterproductive, especially during a time when recruiting talent is becoming more competitive. Investing in employee wellness is not only a way to address the health of your employees but your business as well.