Employee health - financial decision or moral imperative?
The strain on the NHS continues and employee sickness absence is at its highest level in over a decade.
Prioritising health and wellbeing is top of many employers’ agendas in 2025, with poor mental health alone costing UK employers an estimated £51 billion annually.
So, what is changing and why is it more important than ever to consider your approach?
Historically, PMI was a luxury reserved for a small proportion of the workforce, typically senior managers and employees in high-demand sectors.
These decisions were often financially motivated, rewarding those who were deemed most important to the organisation.
This “have and have not” approach has long shaped benefit strategies.
The underlying question was: Are you “important” enough or high-risk enough (in terms of business impact) to warrant the benefit?
However, this is changing as organisations recognise that such decisions are no longer sustainable or equitable.
From luxury to necessity
One of the most notable benefit trends is the significant uptake in private medical insurance (PMI).
The Association of British Insurers (ABI) reported a 7% rise in new PMI policies in 2024, indicating a broader adoption of this benefit.
With the increased demand, employers are dealing with rising claims costs, which are pushing up premiums at a rate greater than inflation.
The increase in utilisation isn’t about unhealthier employees, but lack of access to care elsewhere.
Financial ROI vs. employee equity
Viewing health benefits through a return-on-investment (ROI) lens alone risks under-serving significant parts of the workforce.
Offering benefits solely because of competitive pressure or because of a belief there is a tangible financial benefit to the business will end up in a lack of coverage for vital sectors of the workforce.
The reality is that, as with any other part of business operations, there will be scrutiny to ensure that the organisation’s money is well spent.
For many businesses, it will be difficult to make decisions on other grounds.
On the other side of the equation is the drive for inclusivity and equal access to company-funded benefits for all employees.
Although the pure financial rationale may not be there, it is about taking a stance as a business that everyone should have access to quality care.
The need for data-driven benefits design
Wherever organisations sit on both the financial and moral spectrums when considering these benefits, there is no doubt that more data is needed to ensure the benefits offered are achieving the desired outcomes.
For example, according to a McKinsey & Co report, organisations that actively listen to their employee needs through surveys and data collection see a 10-15% improvement in productivity.
When it comes to the data required, that can be complex – there is demographic data, claims, absence and wellbeing data, productivity data and competitor insights.
All of these are factors that will help determine the right approach for any given business.
Even if you sit high on the moral imperative spectrum (e.g. you feel it is the right thing to pay for cover for all), looking at what that right cover is, who is likely to take it up and claim against it are still essential data points to ensuring your approach is fit for purpose.
Balancing cultural and financial pressures
Despite financial pressures, businesses that overlook employee health risk damaging trust and engagement.
Interestingly many companies are deciding to invest in health despite the costs.
Healthcare is getting more expensive, and more people are asking for it, but the latter influence is trumping the former, and the prevailing trend is for organisations to offer it to more people and accept the cost.
According to The Benefits Design Research 2024 from Howden Employee Benefits & Wellbeing and REBA cost is the number one factor driving decisions about employee benefits in UK businesses.
Yet, despite these concerns, most employers plan to maintain or enhance their existing benefit offerings.
This suggests that businesses recognise the value of employee wellbeing beyond immediate financial considerations.
Furthermore, as environmental, social and governance (ESG) criteria become central to corporate strategies, investing in employee health becomes a natural extension of these values.
Neglecting health and wellbeing could damage a company’s reputation and make it harder to attract and retain top talent or even capital investment.
Time for reflection and action
The truth is that both approaches may be equally valid.
Wanting to be more inclusive doesn’t exist in a vacuum and financial constraints will always play a role in determining the approach companies can adopt.
Wanting to demonstrate ROI in healthcare spend is equally as virtuous, as it will likely lead to improving healthcare design and improving understanding of the causes of absence and under-productivity.
Employers need to be alive to these competing interests, using them to understand their competitive landscape, demands of their employees and budget management expectations of their executive.
It’s time to upgrade our approaches to providing access to health in the workplace.
Supplied by REBA Associate Member, Howden Employee Benefits
Howden provides insurance broking, risk management and claims consulting services, globally. We work with clients of all sizes to provide dedicated employee benefits & wellbeing consultancy.
