Long-term sickness absence costs uk businesses £4.17bn a year
29th October 2015
- Around a quarter of this cost (£1.17bn) is formed of absences caused by mental illness
- By providing access to support early on, businesses can reduce the length and cost of absence and protect the bottom line
A new report from the Centre for Economics and Business Research (Cebr)1 estimates the cost of long-term sickness absence – absences of six months or more – at £4.17 billion to private sector businesses in the UK. And with an estimated 1 in 4 people now experiencing mental health problems at some point in their life – causing over 70 million working days to be lost each year – mental illness represents a significant proportion of this cost: some £1.17 billion a year.
The report, commissioned by employee benefits provider Unum, shows the cost of long-term sickness absence is a growing problem: increasing from £3.13 billion in 20122 and, as the make-up of the workforce changes and the number of older workers increases, it is set to reach £4.81 billion by 2030 – a 15% increase.
However, businesses can take measures to protect themselves from these costs. The research demonstrated that stepping in early to provide support at the first signs of a health problem, before it becomes more serious, reduced the duration and associated costs of long-term sickness absence. Actively using early intervention services such as vocational rehabilitation can reduce the average length of absence by 17% for all conditions, with those with mental health conditions seeing the biggest impact with a reduction of 18%. That means a reduction of more than a year (60 weeks) for the average long-term absence of seven years or turning an absence of seven months into six.
Crucially, the Cebr study shows that in monetary terms, early intervention services could contribute an additional £270 million worth of ‘payback’ to private sector businesses. Overall, through avoiding Occupational Sick Pay and other costs associated with sickness absence, Group Income Protection (GIP) and associated early intervention services can result in an estimated £3.95 billion being returned to businesses. This means that for every £100 an employer spends on a GIP policy, which provides a financial back-up plan for employees in case of long-term illness or injury, with actively-used early intervention services on offer3, they get £66 back.
Peter O'Donnell, Chief Executive Officer, Unum said; "To avoid these preventable business costs, employers should implement a strategy which mitigates the impact of sickness absence. An effective way to do this is through early intervention services which help employers step in when employees show the first signs of having a health problem, and often come as part of a Group Income Protection package.
"Ensuring your employees are healthy and happy isn’t just the right thing to do – it also has a direct impact on the bottom line. Smart businesses should provide their employees with these early intervention services as part of a Group Income Protection plan and, more importantly, ensure that employees take advantage of the services on offer to them."
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1 Cebr Report The benefits to business and the economy of early intervention and rehabilitation Report for UNUM, October 2015
2 Cebr 2012 study commissioned by Unum
3 This ‘payback’ is derived from the percentage of the total spent on Group Income Protection premiums that is notionally returned to the business through avoided Occupational Sickness Pay and other indirect savings