Despite the cost to the UK economy of £13.2 billion a year, the incentives for employers to engage in activities that would reduce absence from work are weak.
- Tax credit to support employers to help people back to work
Despite the cost to the UK economy of £13.2 billion1 a year, the incentives for employers to engage in activities that would reduce absence from work are weak. These are the findings of a report by NERA Economic Consulting, “Sharing the costs - Reaping the benefits - Incentivising return to work initiatives.”
Norwich Union Healthcare commissioned the research which looks at the cost of absence (sickpay, overtime, labour replacement cost, the impacts on quality of service and productivity) as well as the effect on other stakeholders for example, the NHS and incapacity benefit budget2 . It also highlights how market failure reduces the likelihood of employers offering services which could allow their staff to return to work quicker after sickness or injury.
This market failure, the report said, is caused by a number of factors:
- No one stakeholder has an over-riding incentive to invest in early intervention through the workplace
- The supply market for workplace health interventions and rehabilitation (ie using physiotherapy and psychological therapies) is weak, partly because of low demand and lack of innovation in product design
- Employers are well placed to provide workplace interventions but levels of investment remain low (as employers bear only part of the cost of absence – with society bearing the majority of the costs)
- The benefits of early intervention accrue over long time period, so an employer investing now may not see a return on that investment if an employee switches jobs
- The NHS does not prioritise return to work over and above other patients’ needs. 85%3 of GPs believe provision for rehabilitation and return to work services are poor.
The report suggests that fiscal incentives, for example match funding or tax credits could be an efficient and effective way of encouraging take up of activity which has a wider social and economic value.
Edward Bramley-Harker, of NERA economic consulting, said: “Norwich Union Healthcare asked us to investigate the case for encouraging employers to invest in workplace health and rehabilitation services. The research has highlighted scientific literature and case studies which show that the use of interventions can reduce the costs of sickness and get people back into work quicker, but that this would need to be incentivised.”
Tim Baker, commercial director, Norwich Union Healthcare said: “The report seeks to stimulate the debate on the role of tax incentives in encouraging employers to engage with workplace health and rehabilitation services. It shows how the market is failing at the moment but how, with a change in relationship between the stakeholders, we could begin to tackle the problem of sickness and absence in the workplace."
Download "Sharing the costs – Reaping the benefits – Incentivising return to work initiatives" PDF (290KB)
1 Absence minded: Absences and Labour Turnover 2006, CBI2 Two cases studies are included in the report and looks at the costs of the two leading causes of absence; musculo sketetal disorder and mental illness (including stress), their cost to society and business and how these can be reduced through workplace interventions.
3 From research conducted on behalf of NUHC earlier this year. See press release 12 July 2006
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* Enquires regarding interviews with the author of the report Edward Bramley Harker will be managed through Norwich Union’s press office.
Notes to editors:
The full report was commissioned by Norwich Union Healthcare and undertaken by NERA Consulting. It can be found at www.nera.com/publication.asp?p_ID=2926
Edward will present the report to the ABI Health Conference on Tuesday 17 October at The Royal College of Physicians.
About NERA Consulting
NERA provides practical economic advice related to highly complex business and legal issues arising from competition, regulation, public policy, strategy, finance, and litigation. Our 45 years of experience creating strategies, studies, reports, expert testimony, and policy recommendations reflects our specialization in industrial and financial economics. Because of our commitment to deliver unbiased findings, we are widely recognized for our independence. Our clients come to us expecting integrity; they understand this sometimes calls for their willingness to listen to unexpected or even unwelcome news.
NERA Economic Consulting (www.nera.com), founded in 1961 as National Economic Research Associates, is a unit of Mercer Specialty Consulting, an MMC company.
About Norwich Union Healthcare
Norwich Union Healthcare was founded in 1990 as the healthcare arm of Norwich Union and now provides a range of income protection and private health insurance products that cover over 870,000 lives. It is one of the largest providers of income protection and private health insurance in the UK.
Norwich Union acquired Occupational Health provider, Private Health Care, in October 2005. We now offer an extensive range of occupational health services to corporate clients. These services are delivered by Norwich Union Occupational Health Ltd. Norwich Union Healthcare is authorised and regulated by the Financial Services Authority and is a member of the Association of British Insurers and the Financial Ombudsman Service.
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