Return on Investment from MW training

Summary

ROI is calculated from our own and published research data, and financial modelling (we are happy to share our spreadsheet with potential clients).

The significant (>50% average) improvement in stress management capacity and productivity following the 8 week training programme and on-going support, creates a ROI in year 1 of typically over 300%.

For an employee with a £25k inclusive salary cost, we can expect:

  • £877 absenteesim cost (based on UK avg of 8 days sick leave)
  • £2,083 staff turnover cost (based on 10% staff turnover)
  • £1,250 presenteesim cost (based on 5% productivity impairment)
  • 1 year on training programme at costs pp of £320
  • net present value above costs is £296
  • ROI in year 1 is 362%

How this is calculated

Sickness absence
This is a measure of the working days or time lost to employee absence from work due to sickness and ill-health.

Presenteeism
Presenteeism can be defined as the loss in output that occurs when employees are in work but functioning at less than full capacity because of poor health and well-being.

Labour turnover
Labour turnover is the measure of how many people leave your organisation over a specific time period.  People may leave organisations for a number of reasons but high labour turnover can be an indicator of poor health and well-being.  Therefore the cost of labour turnover may be considered a cost of poor health and well-being.

Insurance premiums and accidents/injuries
Costs to meet health and safety regulations and Employers’ Liability Compulsory Insurance (ELCI) to insure their liability to their employees for bodily injury or disease sustained during the course of their employment. Maintaining a good standard of health and safety and employee well-being may mean fewer claims.

Other costs of health and well-being
You can add your own health and well-being measure, for example, cost of early ill-health retirement, private health insurance costs, numbers of ill-health grievances and tribunals.

Average gross wages plus non-wage costs
Wage and non-wage costs are used to capture the full total pre-tax and national insurance cost of an employee to your business. Non-wage costs are typically an additional 30% above wage costs.

Annual number of working days per employee
228 is the standard average number of working days for a full-time employee based on 5 working days a week and 52 weeks in a year less 32 days leave (24 days annual leave and 8 public holidays).

Annual working days lost per employee from sickness absence
This is one of two ways of measuring the level of sickness absence.

Annual proportion of working time lost per employee from sickness absence
This is one of two ways of measuring the level of sickness absence.  It can be calculated by dividing the total absence in a year (in days or hours) by the total working time available.

The average (total) cost of an employee may not accurately reflect the cost of absenteeism for your organisation. The costs could be higher if:
– There are additional direct costs associated with absenteeism, for example, (i) you have to pay overtime to other employees or (ii) employ temporary replacement staff at a higher rate than the sick worker for the same or a reduced level and quality of output.
– There are additional indirect costs associated with absenteeism, for example, the absence of one individual affects the performance of others in the team or levels of customer satisfaction are reduced.
On the other hand, the costs could be lower if:
– Absenteeism is compensated by greater effort or unpaid overtime by other workers or the sick worker upon his/her return to work.
– Sickness is higher amongst lower paid staff (as is consistently reported in UK absence surveys).
– Employees receive lower levels of pay, for example, statutory sick pay during periods of absence, so they bear some of the costs.

Absenteeism adjustment factor
You can change the cost of absenteeism for your business (from average (total) cost of an employee to an alternative value) by entering an appropriate adjustment factor.
Example 1:
Case study evidence suggest that firms typically take action to maintain output when an employee is absent from work.
In Company A, the average cost per employee is £100 a day (£22,800 a year).  When employees are off sick they continue to receive their full pay.  Output is maintained, and the cost of doing this (e.g. overtime, temporary replacement staff) is equivalent to what the absent worker would have been paid. The cost of absence to the employer is therefore the cost of paying the sick worker (£100 per day).  The adjustment factor in this case is simply 1 since no adjustment up or down of the average cost per employee is required to get the full cost of absenteeism.
Example 2:
Similar to the example above, in Company B, the average cost per employee is £100 a day (£22,800 a year).  When employees are off sick they continue to receive their full pay.  Output is maintained but the cost of doing this is greater than what the absent worker would have been paid e.g. temporary agency staff cost £110 a day (£25,080 a year).
The cost to Company B of employee absence is the cost of paying the sick worker (£100 per day) plus the extra cost of the temporary agency worker over and above what the sick worker would have been paid to generate the same output (£110-£100=£10).  The total cost of a day of absence is therefore £110 (£100+£10).
As the total cost of absence is greater than the average cost per employee, an adjustment is required.  The adjustment factor is 1.1 (£110/£100).
Example 3:
In Company C, the average cost per employee is £100 a day (£22,800 a year).  When employees are off sick they receive occupational sick pay at 90% of their normal pay.  Output is maintained, and the cost of doing this (e.g. overtime, temporary replacement staff) is equivalent to what the absent worker would have been paid.
The cost to Company C of employee absence is therefore the cost of paying the sick worker (90% x £100 per day = £90).
As the total cost of absence is less than the average cost per employee, an adjustment is required.  The adjustment factor is 0.9 (£90/£100).

Cost of absenteeism to your business
Cost of absenteeism (days) = (Working days lost per employee from sickness absence ÷ Annual number of working days per employee) x Absenteeism adjustment factor x Average gross wages plus non-wage costs x Number of employees
Cost of absenteeism (proportion of working time lost) = Proportion of working time lost per employee from sickness absence x Absenteeism adjustment factor x Average gross wages plus non-wage costs x Number of employees

Annual working days lost per employee from presenteeism
Estimates on the scale and costs of presenteeism are largely US-based and suggest that the costs can be greater than the costs of absenteeism.  Presenteeism is, however, likely to be lower in the UK due to a greater coverage of sick pay. In the US, workers are less likely to stay at home as a result of poor health and well-being because there is more of a financial incentive to go to work. Nevertheless, presenteeism could be a significant cost to your business.  Presenteeism is a relatively new subject and methods of measurement are still being developed.  As a result, estimates vary.  To estimate presenteeism in your business, you may wish to refer to:
– Existing management or administrative data on performance together with health and well-being status of employees
– Consult managers and employees for self-reported assessments of performance and changes as a result of poor health and well-being.

Annual proportion of working time lost per employee from presenteeism
In the absence of your own estimates, you may wish to select a figure from published studies that are most relevant to your business and what you know about the health conditions and the well-being of your employees.
Alternatively, if you do not feel able to make an estimate, given that presenteeism has generally been found to be more costly than absenteeism, you may wish to assume that the cost of presenteeism is at least the same as that for absenteeism in your business.  Therefore, you would insert the same working days or proportion of time lost figures as for absenteeism.

Cost of presenteeism to your business
Cost of presenteeism (days) = (Working days lost per employee from presenteeism ÷ Annual number of working days per employee) x Average gross wages plus non-wage costs x Number of employees
Cost of presenteeism (proportion of working time lost) = Proportion of working time lost per employee from presenteeism x Average gross wages plus non-wage costs x Number of employees

Proportion of employees that leave each year
The labour turnover rate can be calculated by taking the number of leavers in a year and dividing it by the average number of people employed in that year.
Example:
– On January 1st, there were 50 people employed in Company X.
– During the year, 2 people left the company and 5 people joined.
– On December 31st, there were therefore 53 people employed (i.e. 50-2+5).
– The average number of employees during the year was (50+53)÷2 = 51.5.
– The turnover rate is therefore (2÷51.5) x 100 =4%
Depending on the data available to you, when calculating your labour turnover rate you can choose to use:
– employees who leave for reasons of poor health and well-being only
– all leavers (so also, for example, dismissals, redundancies or retirement)

All leavers turnover rates are generally recorded in benchmarking turnover surveys so entering your all leavers rate will help you to compare your rate to other similar businesses.  However, the all leavers rate does over-estimate the turnover that results from poor health and well-being in your business.  So, if you know the number of employees who leave for health and well-being reasons, you can use this to get a more accurate cost of health and well-being related turnover.

Average turnover cost per employee
This is the average (per employee) cost to your business of a person leaving including:
– separation costs (redundancy costs, resignation costs)
– loss of productivity (pre-departure productivity losses, disruption to others in team, lower productivity of new recruit at the beginning)
– costs associated with covering during the vacancy period
– recruitment and selection costs (advertising, agency costs, interview and assessment centre costs, administration)
– new hire costs (including induction and training)
These costs can vary significantly, depending on a number of factors. For example:
– The more senior the employee leaving the organisation, the higher the turnover cost may be.
– The state of the labour market also influences turnover cost.  In a recession, recruitment costs tend to be lower.
These, and other variations specific to your organisation, should be taken into account when estimating your average turnover cost.  A rule of thumb sometimes used is that is costs 50% of gross annual salary to hire a replacement.

Cost of labour turnover to your business
Cost of labour turnover = Number of employees x Proportion of employees that leave each year (turnover rate) x Average turnover cost per employee

Annual number of claims due to accidents/injuries
This is the number of claims arising each year due to workplace accidents/injury.  You may wish to exclude claims arising from long-tail liabilities as these are not reflective of the current health and well-being of your workforce or organisation and relate to past exposure of a workplace hazard.  Long-tail liabilities are injuries/ill-health where there is a long latency period between exposure to the workplace hazard and the manifestation of the injury/ill-health, for example, some diseases caused by exposure to asbestos.

Average cost per claim
As above, you may wish to exclude claims arising from long-tail liabilities.  The average cost per claim should include administrative costs incurred in processing the claim and managers’ time in dealing with the claim.  Absence from work due to the workplace accidents/injuries need be excluded as these should already be captured in your absenteeism figures.  Similarly, if an employee leaves your organisation as a result of a workplace accident/injury, the cost of this should already be captured in your labour turnover figures.  Compensation to employees should only be included if your business is directly liable (and not paid by the insurance company).

Cost of accidents/injuries
Cost of accidents/injuries = Number of claims x Average cost per claim