Present dangers: presenteeism is the next area of focus as companies seek to maximize their investment in human capital by improving productivity and promoting employee health and wellness

Risk & Insurance, March, 2004 by Marybeth Stevens

These days, innovative and forward-thinking companies are studying the next component in the productivity equation. It's known as presenteeism, or the loss in productivity that occurs when workers are on the job, not but performing at their best.

Historically, absenteeism--tracking and managing the incidents of planned and unplanned employee absences--has been a major focus for many employers. But what about the employee who is at work but not fully functioning? What causes presenteeism? How do employers identify and intervene to help their employees achieve optimal productivity?

Looking at presenteeism, the focus shifts to the employee who is present but not performing at his or her best due to outside factors that include chronic or episodic illness, distraction from family care needs, personal problems or other concerns.

"As I look at the different types of lost-time events that an employee may have, on the far end of the continuum are long-term disability or catastrophic workers' compensation cases. Short-term disability and the shorter absences of one or two days represent the middle of the 'lost-time" continuum. Presenteeism is the logical next step on this continuum. The person is actually at work, but not fully engaged," says Adam Stetzer, chief operating officer of Nucleus Solutions, a Virginia-based consulting firm that helps companies confront employee absence and productivity issues.

Presenteeism clearly is the new frontier as companies continue to seek ways to reduce costs, improve productivity, and promote employee health and wellness.

"Our current work with presenteeism is an evolution from the programs we've had in place over the years--projects that have shown a positive return on investment and a positive return for employees," says Dr. Pamela Hymel, vice president of medical services and benefits with Hughes Electronics Corp.

Presenteeism More Expensive and Riskier than Absenteeism

Presenteeism has a major impact on a company's bottom line--more costly, some experts agree, than incidents of absenteeism. "When you look at total costs, meaning direct and indirect costs to a corporation in terms of medical costs, absenteeism, short-term disability, long-term disability and presenteeism, our estimate is that presenteeism accounts for about three quarters of the total," says Dr. Wayne Burton, senior vice president and corporate medical director for Chicago-based BankOne. "The rest accounts for a little over one-quarter."

Looking at health-related presenteeism issues, industry studies show that productivity losses amount to $2 to $3 for every $1 spent by the employer on direct medical costs. In some industries, the cost can be as high as 10-to-1.

To put these statistics in perspective, the national average of direct medical and pharmacy costs is about $7,000 per employee. Using a conservative 2-to-1 ratio that means $14,000 is being spent per employee, per year on medically related productivity losses, according to Dr. Ronald Lopped, chief health officer for CorSolutions Inc., which works with employers like Hughes Electronics to implement disease management and integrated health-related productivity improvement initiatives.

Tracking Health-Related Presenteeism

Chronic health conditions such as diabetes, obesity, asthma, depression, pain disorders and allergies have a major impact. To combat this problem, Chicago-based BankOne Corp. and Hughes Electronics have gathered and analyzed data from employees using health and productivity surveys.

Using the surveys, "we looked at what health problems and health risks they had and how productive they were on the job," Burton, of BankOne, says. "We were able to capture the [decreases] in productivity and the rise in presenteeism costs."

Hughes Electronics targeted its call center in Boise, Idaho, which was found to have higher medical costs and a higher rate of disability than other populations in the company. It offered a financial incentive to employees for participating in the company's survey.

The findings were compelling: Of the 1,864 employees who participated, 8.6 percent reported they experienced a pain disorder that affected productivity. While this was below the national average of 13 percent (as reported in the November 12, 2003 issue of the Journal of the American Medical Association), the pain disorders experienced by the Hughes employees cost an estimated $500,000 in lost productivity and an aggregate 1,600 in lost days every year.

Obesity showed the most significant impact, leading to an average of 20 days productivity loss per year per obese employee, and a cost of $5,350. At a 7 percent prevalence of obesity among the 1,864 employees surveyed, the aggregate cost impact from presenteeism and absenteeism was an estimated $700,000.

Allergies, with 38.5 percent prevalence at the time the survey was taken (in April), resulted in an average of four days" loss per year per employee and total productivity losses of $900,000 across the 1,864 workers. "These are very clear and present dangers, both from a perspective of medical risk to the workforce as well as financial risk to the company," said Loeppke. Presenteeism warrants a close look from employers at the root causes and the collective response.