Towers Watson Study: Investing in Workforce Health Generates Higher Productivity

As Canadian organizations search for ways to improve workforce productivity, they are trying new approaches to combat the double-whammy of rising health costs and increased employee absence, stress and disability - and some are succeeding more quickly than others. High-effectiveness companies are using tactics like financial rewards to encourage and support their staff in making better lifestyle health decisions. While incentive pay to encourage participation in health and productivity programs is a common practice in the US, a new survey by global professional services company Towers Watson shows that the number of organizations implementing this strategy in Canada is on the rise.

According to Towers Watson’s 2011/2012 Staying@Work survey, a quarter (26%) of Canadian employers are planning to offer some type of financial reward in 2012 to individuals who participate in their health management programs -- up from just 13% who currently do so. As Wendy Poirier, Health and Group Benefits Leader for Towers Watson in Canada notes, "We are seeing employers increasingly realize the importance that health and productivity programs can play in their efforts to control health care costs and maintain a productive workforce. While the outcomes of any one tactic can’t be guaranteed, high effectiveness companies with thoughtful multi-faceted programs are reaping clear returns on their investments in workforce health.”

Mental Health Top Driver of Canada Disabilities as Workplace Stress Rises

Despite growing awareness and action, mental health conditions continue to be the most common reason for disability claims in Canada. Survey respondents identified the top three drivers of their short-term disability claims. Fully 83% cited mental health conditions (followed by muskuloskeletal/back issues at 76% and accidents at 37%). Similarly, mental health conditions are cited by 85% of respondents as a top driver of their long-term disability claims (followed by Muskuloskeletal/back issues at 76% and Cancer at 63%).

Most organizations report that employee stress is a major and growing business issue, and many are planning to adapt their organizational health strategies for the next two years to include a focus on mental health (61%) as well as physical health. Canadian respondents cited excessive workloads, lack of work/life balance, unclear or conflicting job expectations and inadequate staffing as the top sources of workplace stress. The survey results indicate that the prevalence of each of these stressors has risen significantly over the last two years. For example, today nearly 9 in 10 (89%) of Canadian employers say excessive workload is a problem -- a staggering 25% jump from 2009 to 2011 (from 64% to 89%). Though organizations are striving to limit the impact of workforce stress on business performance, the majority report underwhelming results. In fact, less than 10% of companies say their actions have produced significant success.

The cost implications of inaction may soon force some organizations to improve their game. As Keri Alletson, Senior Consultant and a member of the research team notes, "Over the past few years we’ve seen employers asking employees to work longer hours and to do more with less, leaving less time for healthy activities like going to the gym, or eating properly. At the same time, people are worrying about job security and their personal wellbeing. Together, these factors can add up and take a serious toll on both physical and mental health, as well as increase absence from work and presenteeism. In addition to the individual consequence, the business consequences — higher health care costs, reduced work performance and lost productivity — can be significant.”

Better Health Management Drives Better Business Results

In 2011, health and productivity costs as a percentage of payroll totaled just over 17% in Canada, up from 12.6% in 2009. Organizations with effective health and productivity practices are achieving significantly better business outcomes. The benefits include a lower average turnover rate (8% instead of 10.4%), fewer unplanned absences -- and for publically traded companies, an 18% market premium compared to organizations with low health and productivity effectiveness (*See Editor’s Note).

"Our research has clearly identified best practices most closely associated with positive employee health and productivity outcomes, and how those programs link to business results,” said Julie Holden, leader of Towers Watson’s Health & Productivity practice in Toronto. "On the health side, these include prevention and return to work strategies, and program support. On the workplace side, we’ve identified rewards, leadership and communication as three key pillars to build a work environment that enables employee performance."

"Even for those not yet ready to launch a full-blown culture of health strategy, companies could be doing a lot more in terms of their absence and disability management,” says Holden. "Less than half of Canadian organizations are taking the right steps in this area, like conducting regular disability claims management audits, rethinking internal staffing and resources and implementing performance standards for their vendor partners. Most employers can benefit from better governance of their disability programs to improve efficiency as well as effectiveness. Ultimately, employers want to focus on helping employees return to work appropriately, while also providing better support to those who need it to remain healthy and productively engaged.”

What High-Effectiveness Companies Do Differently

High-effectiveness companies invest more in health and productivity than organizations with less-effective programs, and experience better results. They also focus not just on physical health prevention, but build programs that address both health programs and workplace conditions.

According to the survey, employers with effective health and productivity programs are doing much more to link senior leaders to program performance, engage employees in the management of their health with incentives, measure program outcomes, target preventable causes of employee absence and personalize communications for specific employee populations.

"The evidence overwhelmingly shows that effective health and productivity programs can make a real difference to an organization’s bottom line,” said Poirier. "There are unrelenting pressures on employers and employees today, but improving employee health is an opportunity for a true win-win.”

About the Survey

The Towers Watson Staying@Work survey is a biennial study of North American companies’ health and productivity practices. The 2011-2012 report is the most recent in a series of research that started sixteen years ago. The survey identifies the strategies and tactics taken by companies with the most effective health and productivity programs and analyzes the financial advantage of their efforts. The survey was completed by 335 human resources and/or health benefit managers in Canada (87) and the United States (248) with at least 1,000 employees. The responding organizations employ 7.8 million workers and operate in all major industry sectors.

EDITORS’ NOTE: Market premium for High-Effectiveness companies was 23% versus 5% for Low-Effectiveness companies. Market premium is the ratio of the market value of equity plus the book value of debt divided by the book value of assets minus one.

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.