With many employers still blind to the financial burden of employee sickness absence on their companies, Professor Michael O'Donnell explains what firms can do to curtail costs.
Employee absence can be damaging for any organisation, with the reduction in resources potentially leading to reduced productivity and lower staff morale. In fact, the cost of staff absence to the UK economy rose to £13.4bn in 2006. According to the Chartered Institute of Personnel, the average number of days lost per employee in the UK is around eight and costs employers around £598 for every employee every year. To put this in perspective, the cost of absence for a business with 1,000 employees could be £598,000 a year, amounting to some 800 days lost - the equivalent of operating with 30 people short. It is, therefore, in every business's interest to put strategies in place to manage such risk.
Despite these figures, Unum's recent Sickness Absence Survey revealed that almost two-thirds of employers (63%) did not think sickness absence was an important issue for their organisation.
This is perhaps partly accounted for by the fact that only around a third (34%) of employers know how much sickness absence costs their organisation each year and almost half of employers (47%) did not know how long they would have to pay their employees their full salary if they were unable to work due to illness.
However, there are also significant differences in perceptions around sickness absence in organisations of different sizes or sector. For example, 79% of large businesses thought that sickness absence was an important issue for their business, while only 29% of businesses with a turnover of £100,000 to £250,000 thought this was the case; 59% of transport or communications employers thought that sickness absence was an important issue but only 28% of business services and 29% of agriculture or mining sector businesses thought this was the case.
Group income protection (IP) exists to mitigate the costs of long-term sickness absence by providing an employee who cannot work due to illness with an income until they recover and return to work. Historically, this benefit was provided on the basis that, subject to the individual remaining on the payroll, if the employee did not recover from their illness the payments would continue for a pre-defined maximum period or up to retirement age.
Rhyme and reason
In recent years, however, insurers have been reconsidering the design of their risk benefit products as the cost of the product has risen. The rise in costs is due to a number of factors, but especially increased claims incidence, in particular for mental ill-health conditions. More recently, new legislation, such as The Employment Equality Regulations introduced in 2006, has also had an impact.
One of the consequences is that insurers are increasingly focusing on rehabilitation services alongside their IP products. They have also been looking at adding complementary services, particularly those that help with absence management, prevention and wellbeing. This has served to help both differentiate their offering and manage claims costs.
The change in expectations is now such that industry research has shown that rehabilitation services are regarded as a key element for employers when selecting their current insurer.
As a result, the protection industry has seen an increasing amount of innovation from insurers in this area; not only to try and differentiate their service but also to actively manage any claimants back into the workplace where circumstances allow. Other services, such as absence tracking programmes, employee assistance programmes or employer/employee helplines have, until recently, been seen as ancillary offerings that could not be integrated with the IP product, but these too are now becoming synonymous with the provision of a market leading IP offering.
Unum is not immune to this need for innovation either. Although it has provided a comprehensive in-house rehabilitation service for a long time, in the past year Unum has expanded the offering to include an absence management assessment service and an absence tracker service via Unum Group company WorkMatters.
The absence management assessment service aims primarily to help employers improve their in-house arrangements for case management of sick and/or absent staff and to assess the quality of related activities that are conducive for an early return to work.
The scheme involves a week-long assessment, carried out by accredited absence management assessors. They look at the employer's in-house arrangements across 16 different aspects of their human resource management activities, ranging from sick pay arrangements and sickness absence management protocols, through workplace "accommodations" for those returning to work after illness, to health and safety, ergonomics, employee communication and health promotion activities.
The absence tracker service meanwhile provides the first point of contact for all absent employees. It is based on an intelligent software solution that enables individuals to contact a dedicated absence line and provide details of their absence. The employee's details are captured, recorded and depending on the cause or duration of the absence, an email/text notification will be passed onto the line manager immediately. This process is designed to leave a clear audit trail for both employee and employer and delivers a low-cost consistent approach to managing absence across a whole organisation.
Occupational physicians have always had a role in absence management, but traditionally this was a passive one that involved seeking information about medical conditions and advising employers on the likelihood of a return to work. By stepping this up and complementing IP with the adoption of a proactive rehabilitation approach early on in the illness, the chances of a successful return to work for the employee are significantly increased.
In terms of when to implement rehabilitation, the earlier a rehabilitation expert is able to intervene the better the outcome. Early intervention is key to an effective rehabilitation scheme because although when an employee initially becomes ill everyone tends to be prepared to work towards a solution, the situation can often deteriorate with time. This is because negative beliefs tend to emerge over time, leading to increased alienation and hostility between employer and employee. A rehabilitation case manager is able to mediate the situation and hopefully intervene before this situation develops.
Many insurers outsource their claims management services rather than having the medical or rehabilitation services in-house. This can affect the ready availability of appropriate advice and intervention and prolong the time it takes both sides to communicate. In addition, in-house experts have the security of guaranteed employment and this can help to protect the independence of their views as they are less likely to be encouraged to court the insurer with potentially favourable findings.
The way forward for the group IP industry will undoubtedly be full of more innovation and a rapprochement of the worlds of insurance and absence management techniques. Other developments organisations can expect to see from leading players include the use of telephonic claims form completion options and, significantly, insurers routinely paying for a customer's medical treatment if it is not readily available on the NHS or via private medical insurance and is likely to aid return to work.
Despite the fact that many organisations believe they are handling sickness absence in an adequate manner, unfortunately the majority still do not know the real cost of sickness absence to their organisation. To ensure maximum efficiency and productivity, employers need to invest more resources in assessing sickness absence and evaluating the exact costs to the business. Linking rehabilitation and absence management services into IP schemes is one way for insurance providers to ensure that they are giving them all the support they need to achieve this. n
Professor Michael O'Donnell is chief medical officer at Unum
