Does the ROI Justify Employee Wellness Programs?

Modern business loves acronyms like KPIs (key performance indicators) and ROI (return on investment). The two are often discussed hand-in-hand for the simple fact that KPIs play a role in measuring ROI. Take employee wellness programs. Does the ROI justify implementing one? That depends on the KPIs a company uses to measure its ROI.

There are undoubtedly some companies that measure employee wellness ROI purely in terms of dollars and cents. They look at how much they spend on employee wellness as compared to their healthcare expenditures. They might measure employee wellness costs against the perceived cost of employee absenteeism.

Employers Report a Positive ROI

Although employers may measure employee wellness ROI differently, most report a positive ROI overall. At least that’s what a YouGov and Virgin Group Ltd. survey of 600 global employers seems to indicate.

According to the survey, 70% reported positive ROI from their employee wellness programs. That’s up roughly 23% from a similar survey conducted in 2018. In addition, roughly 66% say they are seeing higher participation rates in their employee wellness programs. U.S. employers have seen an 80% increase while their French counterparts report a 75% increase.

Compared to Healthcare Costs

Comparing the costs of both employee wellness programs and health insurance plans establishes ROI in hard financial numbers. For example, a 2011 study of Johnson & Johnson’s employee wellness program between 2002 and 2008 demonstrated that the company saw a reduction of $3.27 in its healthcare costs for every dollar spent on the wellness program. Likewise, their estimated absenteeism costs fell by $2.73.

A three-to-one ratio represents a very strong ROI that fully justifies implementing an employee wellness program. But did every company reporting a positive ROI in the YouGov survey see that high of a return? We don’t know. We do not even know how the surveyed employers measure employee wellness ROI.

The bottom line is that relying on ROI to justify investing in an employee wellness program depends heavily on how a company measures its return. Comparing healthcare costs against employee wellness costs is pretty static. Both are known entities. But if you are trying to measure in terms of absenteeism, employee productivity, the prevalence of mental health concerns, etc., you’re entering a gray area.

Mental Health Is Hot Right Now

All of this becomes important to employers looking to add wellness programs to their benefits packages. And according to BenefitMall, a brokerage general agency, mental health is hot right now. Wellness programs that include mental health benefits are near the top of the list for companies looking to expand their voluntary benefits packages.

One of the advantages to offering mental health benefits as part of a total wellness package is that there isn’t a single way to do it. One company could do nothing more than give access to reduced cost mental health services provided outside the workplace. Another could combine those services with on-site counseling, educational resources, workshops, and the like.

Regardless of how a company chooses to go about it, one thing is clear: the COVID pandemic and its associated fallout have led to an increased demand among employees mental health benefits. Adding them to an employee wellness package is one way employers can meet the need.

Choose Your KPIs Wisely

Does the ROI on employee wellness programs justify investing in them? That depends on how you measure. If you own or operate a company looking at starting a wellness program, choose your KPIs wisely. They will affect the ROI measurement and, ultimately, whether or not management believes employee wellness is worth putting money into.

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