January 10, 2023 | By Questco
Did you know that 52% of all employers and 83% of companies with over 200 employees offer a corporate wellness program?
However, despite so many companies providing wellness programs, a survey by the International Foundation of Employee Benefit Plans (IFEBP) found that only 28% of companies measure the ROI of their employee wellness program.
The Return on Investment (ROI) evaluates and incorporates the hard and soft benefits of the corporate wellness programs for the company and its employees. There is conflicting evidence on whether a wellness program has a positive ROI since some researchers only measure the hard, tangible benefits while others measure ROI holistically.
According to a study run by Fidelity Investments, wellness and health improvement programs cost between $36 to $1,200 per employee per year, with an average of $742.
Generally, a wellness program’s cost depends on the company’s size and other additional features intended to increase the well-being of employees.
Stand-alone apps cost $36-$90 per employee per year, but that doesn’t include costs for biometric screening, health coaching, or benefits-based incentives. This wellness pricing model also ignores the cost of hiring a “wellness coordinator.”
The Wellness Council of America recommends spending $100-150 per employee per year. The spending is exclusive of incentives and health coaching services provided to the employees.
Dr. Ron Goetzel of Cornell University recommends investing $150 per employee per year.
At the same time, Dee Edington, a University of Michigan expert on wellness program ROI, estimates that spending should range from $300-$400 to get a good return on investment.
The hard benefits of corporate wellness are tangible and easy to measure in dollars.
For example, the Havard Business Review studied the ROI of corporate wellness programs in Johnson & Johnson and found that the percentage of employees with high blood pressure or physical inactivity decreased by more than half. This led to the company saving an estimated $250 million on healthcare costs from 2002 to 2008.
The return on investment for J&J’s corporate wellness program was $2.71 for every $1 spent.
The article also revealed that an employer of 185 workers saved $1,421 per employee in medical cost claims, resulting in an ROI of $6 for every $1 spent.
A follow-up meta-analysis in Health Affairs found that medical costs fall by $3.27 for every $1 spent.
Another study by the RAND Corporation teased out a subtle distinction and found that wellness programs reduced the employer’s average healthcare costs by about $360 per member per year.
However, 87% of that decrease came from disease management instead of lifestyle management (30% reduction in hospital admissions).
The ROI for two components is $1.50 for every $1 spent. The ROI for disease management alone is $3.80, and $0.50 for lifestyle management. RAND’s study also noted that lifestyle management decreased absenteeism by only one hour per employee year.
Soft benefits refer to those that aren’t so easily such as employee engagement, productivity, retention, and a decrease in absenteeism and presenteeism.
While difficult, some studies have managed to link the intangible (soft) benefits to monetary outcomes. For instance, one study found that wellness program correlated to reduced absenteeism.
Similarly, a Health Affairs article found that for every dollar spent on a wellness program, absenteeism costs fall by $2.73.
The cost of lost productivity can be estimated using a 2009 study that found productivity costs were 2.3x higher than medical and pharmacy costs.
As for retention, 45% of Americans working at a small- to medium-sized company say they would stay at their jobs longer because of employer-sponsored wellness programs.
The cost of replacing an employee who quits cost half to 1.5 times their annual salary.
Health and wellness of employees is important to enhance productivity and performance of the organization.
One way to improve wellness outcomes while seeing a positive ROI is to partner with a professional employer organization (PEO).
A PEO is a full-service human resource outsourcing that performs various employee administration task particularly for small businesses.
Most often, small business pay 18% more in health insurance premium compared to bigger corporation. With PEO, small and medium sized businesses can save on health insurance premiums.
Thanks to savings on employee benefits and workers compensation, PEOs have an average ROI of 27% .
Please note that the information presented above is not intended to be specific, technical, or professional advice. Our aim is to educate and provide insight into relevant topics.