2003 Lane Reports

Employee Wellness: Is It Possible To Increase the Bottom-Line by Decreasing the Waist-Line?

Tuesday, July 1, 2003

The performance of a corporation depends in large part upon the performance of its key asset—employees. Depreciation of a worker's productivity is a significant cost that is not a deductible expense on a company's tax return. Just as management will do what it takes to protect the longevity of it's other valuable assets, care should be taken to protect the well-being of each employee.

Concern for employee health and wellness has come a long way from the days of simply providing medical insurance and a first-aid kit in the lunchroom. Companies are beginning to connect the dots and recognize that an increase in the overall mental and physical health of its employees will result in a decrease in overall costs.

A wellness program that educates employees and makes it easier for them to institute a healthier lifestyle will result in higher productivity, reduced absenteeism, reduced health-care costs, and lower worker compensation costs.

Why Wellness?

Increased health care costs are quickly becoming a major concern for many U.S. corporations.

Ford Motor Co. and General Mills Inc. recently announced they will work together to fight an employee obesity epidemic. Health-care costs related to obesity are as high as $12 billion annually, according to an estimate by the Washington Business Group on Health, an employer lobbying group. The lobbying group is coordinating efforts across Fortune 500 companies to identify obesity related costs and potential solutions.

According to one recent study, stress accounts for $26 billion in medical and disability payments and $95 billion in lost productivity per year. A 1990 study by Foster Higgins & Co. found that the average company spent 45 percent of its after-tax profits on health benefits. Ford, the second biggest private buyer of health care in the country, paid about $3 billion last year in health care for current and former employees.

But employers shouldn't evaluate the effectiveness of their health-care plans only according to an increase or decrease in the costs of employee medical treatment. A hidden cost of work-related stress and illness is the lost productivity due to replacement staff and absent employees.

Employers are beginning to recognize that the workplace itself is a major cause of stress and illness in the life of its employees. Stress directly affects a company's bottom line by increasing the cost of employee benefits and worker's compensation claims, decreasing productivity and morale, and making employee turnover more likely. One recent study found that 60% of CFO's polled see a strong link between health, productivity, and the bottom line. Taking a pro-active approach to reducing stress will increase the overall health of the company.

Benefits of a Wellness Program

A thoughtful and integrated employee wellness program is not necessarily expensive, especially when compared to its potential long-term benefits.

Decreased Employee Stress. The slumping economy and current geo-political situation have added to an employee's normal load of workday stress. Stress is a leading cause of illness and injury. It also causes a narrowing of the thought process, restricting an employee's ability to “think outside the box.” In one recent survey, 78% of the workers polled cited stress as the leading cause of work related accidents and mistakes, and 76% named stress as the main cause of absenteeism.

Decreased Absenteeism. The absence of a worker may indirectly affect the productivity and functioning of the entire company. A study published in the American Journal of Health Promotion found that highly-stressed employees were two times more likely to skip work more than five times per year. The Journal of Management reported in 1999 that absenteeism accounted for 550 million lost working days in the U.S. annually, half of which were due to stress. A wellness program is an effective step employers can take to prevent employee absenteeism. Pacific Bell found that employees who participated in its wellness program averaged one less absence day than non-participants.

Lower Medical Premiums. A wellness program that results in healthier employees and a corresponding sustained reduction in medical costs will reap significant cost savings. For example, Union Pacific Corp. estimates its health and wellness program saved $1.26 million in 1996. One subsidiary of Sara Lee Corp. saw a 40% reduction in long-term disability costs in 1994 due to its wellness efforts.

Recruiting and Retaining Employees. In the current economy corporations are looking for ways to lure employees besides offering high salaries or bonuses. Those companies that have instituted broad wellness programs are finding it easier to attract and retain quality employees and to increase productivity.

Better Customer Service. Happier, healthier employees are better equipped to interact with customers or clients and deal with complaints. The potential financial rewards of a program designed to increase employee wellness is significant. A study published in the Harvard Business Review found that a 5 percent reduction in customer defection can lead to a 30 to 85 percent increase in profits.

Creating a Wellness Program

The work environment has a profound effect on the health and wellness of an employee. A workplace that encourages exercise and proper nutrition will help employees learn how to reduce stress and integrate regular stress reduction techniques in their daily routine.

Some companies promote exercise by subsidizing health club membership fees. It is now possible, however, to bring the health club straight to the office.

The list of employers who offer yoga classes at work is surprising: IBM, Microsoft, GE, AT&T, Pepsico, ABN AMRO, Coca-Cola, and KPMG, to name a few. Offering a yoga class in an empty conference room provides an employee easy access to exercise and fosters community within the office. The classes are often specially designed to teach stress reduction techniques specifically related to body ailments experienced at work, such as carpel tunnel syndrome, tight neck muscles due to lengthy phone conversations, and soreness in the back resulting from sitting all day at a desk.

It is also common for employers to periodically set aside a quiet room in the workplace and bring in a massage therapist to offer short sessions during the day. Therapudic body massage has been shown to reduce heart rate, lower blood pressure, and decrease anxiety and tension. In a recent study, office workers who were massaged regularly were less stressed, more alert, and performed better than those who did not receive massage treatment.

One Chicago company, Guru-to-You (www.gurutoyou.com), provides an instant employee wellness solution. Guru-to-You will bring massage therapists, yoga classes, and nutrition counseling to the office either before or after work or during lunch. The cost is either paid entirely by the employee or is subsidized by the employer.

An employer may also want to encourage employees to lead a healthy lifestyle by giving gift certificates to health-food stores in exchange for following the wellness program or exercising regularly.

The results on employee wellness are in: the corporation's bottom line is directly related to the employee's waistline. Healthy employees are more productive and more cost effective. Companies that take pro-active steps to protect their “intellectual capital” will enjoy a reduction in health related costs and an increase in the overall well-being of their workforce.

We would be happy to talk with the management of any company about instituting an employee wellness program specifically tailored to its needs.

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The Lane Report is a publication of The Law Offices of Marc J. Lane, a Professional Corporation. We attempt to highlight and discuss areas of general interest that may result in planning opportunities. Nothing contained in The Lane Report should be construed as legal advice or a legal opinion. Consultation with a professional is recommended before implementing any of the ideas discussed herein. Copyright, 2003 by The Law Offices of Marc J. Lane, A Professional Corporation. Reproduction, in whole or in part, is forbidden without prior written permission.

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