How to Measure the Impact of Workplace Wellness Incentives

Workplace wellness incentives are becoming increasingly popular as employers recognize the benefits of promoting healthy behaviors among employees. To the unfamiliar, wellness incentives are simply the specific tools a corporate wellness program uses to motivate employees to meet its goals.

Categories of Workplace Wellness Incentives

The incentives can fall into two broad categories: monetary and non-monetary incentives.

Examples of monetary incentives include:

Gym memberships/ reimbursements
Health insurance discounts
Cash rewards for a timely annual physical check-up
Contributions to the employee’s Health Savings Account or Healthcare Flexible Spending Account
Subsidized wellness classes

Note that per the Affordable Healthcare Act (ACA) guidelines, employers can offer financial incentives of up to 30% of the total cost of coverage for a health-contingent wellness program.

Non-monetary incentives can include:

Healthy meals and drinks in the office
Company-sponsored marathons
Experiential rewards like a fitness-related trip
Free mental health resources
Paid time off for a fitness-related event

According to the 2023 Kaiser Family Foundation Employee Health Benefits Survey, 14% of all firms with employee wellness programs use incentives to encourage participation. However, there’s a huge debate concerning the effectiveness of these programs.

Per the KFF report, only 29% of employers consider their wellness incentives to be “very effective” in driving employee participation in wellness programs.

The question then becomes, why do the remaining 73% still offer incentives? To answer that, we need to consider how the impact of a wellness incentive program is measured. Let’s dive in.

Measuring the Impact of Workplace Wellness Incentives

When Charlie* started his new job at a 911 answering center after the pandemic, he was struggling with his physical health and staying focused at work. Although he gets two 15-minute breaks per day, going to the gym during either wasn’t possible.

Luckily, his company’s wellness program offers a $300 reimbursement at the end of the year for health and fitness-related expenses. With the program’s support, Charlie managed to get his type 2 diabetes under control within a year through cycling and has since become a serious cyclist.

wellness reimbursements helps Charlie become cyclist

Charlie’s case is just one example of how a workplace wellness incentive can positively impact an employee’s health and well-being.

In a typical employee wellness program, success is tied to a specific end goal – losing weight, quitting smoking, or regular gym attendance. These are what call immediate impact metrics.

Over time, the ripple effect of these changes can yield long-term success, resulting in higher retention rates, improved productivity, and reduced healthcare costs.

Immediate Impact Measurements

1. Wellness Program Participation Rate

Participation rates are the pulse of a workplace wellness program’s appeal. They let us know how engaged employees are with the wellness offerings in the program and help us plan.

Generally, high participation rates suggest that incentives are well-aligned with employee needs and interests. Conversely, low rates may indicate a need for some adjustments to ensure the program resonates with employees.

To calculate: Divide the number of employees participating in the program by the total number of employees eligible, then multiply by 100 to get a percentage. For example, if your company has 500 eligible employees and 250 participate in the wellness program, your participation rate is 50%.

2. Health Screenings/Biometrics

Health screening offers a snapshot of the workforce’s health status.

Biometric data, like blood pressure, BMI, and cholesterol levels, provide objective before-and-after health outcomes, indicating how effective your wellness initiatives were within a given period. They also help in personalizing wellness initiatives to address specific health risks.

Changes in biometric measurements can be tracked individually or aggregated into a health risk score. Here are the general guidelines:

Body mass index (BMI): A BMI of below 18.5 means you’re underweight. Between 18.5 to 24.9 is considered normal or healthy weight. A BMI of 25 to 29.9 is considered overweight, and a BMI of 30 or higher is considered obese.
Blood pressure: A blood pressure reading of less than 120/80 mm Hg is considered normal. A reading of 120-129/80 mm Hg elevated, and 140/90 mm Hg or above high blood pressure.
Cholesterol: A total cholesterol level of less than 200 mg/dL is considered desirable. A level of 200-239 mg/dL is considered borderline high, and a level of 240 mg/dL or higher is considered high.
Blood glucose: A normal fasting blood glucose level should be between 70 and 100 mg/dL. A level of 100-125 mg/dL is considered prediabetes, and a level of 126 mg/dL or higher is considered diabetes.

3. Attendance Metrics

Trends in sickness-related absences can also gauge how effective a wellness initiative is in the short term.

In one study by the Society for Human Resource Management (SHRM), companies with an employee wellness program had 11% lower absenteeism rates and a 28% reduction in short-term sick leave usage.

Generally, a quick drop in sickness-related absenteeism or sick leave usage numbers suggests the wellness incentive is effective in improving employee health.

How to Measure: Absenteeism rate = (Number of days absent due to illness / Total number of workdays) x 100%

Long-Term Impact Measurements

In a perfect scenario, the return on investment of a workplace wellness incentive would be quite high. However, there are varying findings in this area. Take the widely cited study by Baicker, Cutler, and Song (2010), for example.

According to the review, employers with a corporate wellness program yielded an ROI of about $3.27 for every $1 spent on medical costs. A more recent study by Baxter, et al. (2014) found lower returns, with each $1 spent on a wellness program yielding an average ROI of $1.38.

“The use of financial incentives appears to increase employee participation in wellness programs, but only modestly,” concluded researchers in the RAND Health Quarterly, 2015. “Employee participation in lifestyle management aspects of workplace wellness programs does not reduce healthcare utilization or cost regardless of whether we focus on higher-risk employees or those who are more engaged in the program.”

This does not mean workplace wellness incentives are useless. As the researchers observed, companies with a comprehensive workplace wellness program reported a 59% participation rate.

Since the comprehensive program has varying components (Screening, lifestyle management, and disease management), it encourages employees to build and maintain positive healthy behaviors that result in long-term benefits. Here’s how to measure these impacts:

1. Turnover Rates

According to the Harvard Business Review, workplace stress increases voluntary turnover by up to 50%. High turnover leads to reduced productivity, low employee engagement, and decreased productivity, to name a few. Additionally, the cost of replacing an employee can be as high as 2X their annual salary.

A positive workplace culture is the antidote to employee engagement, brand perception, and even recruitment and retention challenges. That takes time to build. And work.

Over time, a decrease in turnover rates can imply there’s improved job satisfaction and employee morale, which may be influenced by effective wellness programs.

Some sources of turnover data and what it means for your workplace wellness program include:

Exit interview data
Employee surveys
Performance reviews
Social media monitoring on platforms like LinkedIn and Glassdoor

2. Productivity Metrics

We know that reducing absenteeism and presenteeism is one way of improving productivity. In the same vein, increased productivity can be a sign that employees are healthier, more engaged, and better able to focus on work, potentially as a result of wellness programs. However, long-term measurements of how a wellness program impacts productivity can take time to manifest.

Unlike physical health, which is easily quantifiable, we must consider other factors affecting productivity. For example, poor mental health results in low motivation which then leads to lower productivity. We also need to consider how the incentive program contributes to the workplace culture and social interactions.

Ultimately, there are various ways of measuring the impact of a workplace wellness incentive on productivity. These include:

Work output per given period
Task completion rates
Number of errors
Customer complaints and ratings
Performance reviews

3. Employee Surveys

Periodic employee surveys are a great longitudinal tool to measure the impact of a wellness incentive program. These surveys capture self-reported data on various areas like health behaviors, mental wellness, and job satisfaction, allowing you to assess the employee’s true feelings about the wellness program. This is quite useful in identifying areas left out by quantitative data.

While quantitative feedback tells you the “what,” you need qualitative feedback to understand the “why.” In other words, insights into the employee experience that numbers alone cannot capture.

Tip: Insights from an employee survey grow richer over time, painting a detailed picture of the incentives’ enduring impact.

4. Healthcare Spending/Insurance Claims Data

Well-designed and properly targeted workplace wellness incentives can result in substantial health care cost savings. To measure your program’s effectiveness, analyze before-and-after trends in healthcare spending or insurance claims over the year.

Let’s assume your company offers wellness incentives for employees to participate in fitness challenges, attend nutrition classes, and receive regular health screenings. How do the average healthcare spending and insurance claims for employees who participate in the fitness challenges compare to those for those who don’t?

If the former group has lower healthcare spending and insurance claims, this might mean the fitness challenges are having a positive impact on employee health and well-being.

Considerations for Measuring Workplace Wellness Incentives

Details matter when quantifying the success of a workplace wellness incentive. Which metrics do you want to measure? How do you measure them? When? Here’s what we mean:

Timing and Frequency of Measurements

To reiterate, timing is everything when assessing the true impact of wellness incentives. Ensure you don’t take measurements too frequently that they become noise, but also not so sparsely that they miss the plot. The goal is to establish a rhythm that aligns with business cycles and health initiative milestones. For example, you might consider conducting biometric screenings annually to track health trends, while participation rates could be monitored quarterly to keep a finger on the program’s pulse.

Depth of Analysis

The level of analysis is equally critical. Do not just skim the surface with aggregate data; dive deeper to uncover possible patterns and disparities. This might mean segmenting data by department, age, or job role to understand who is benefiting most and who might be left behind. Going granular reveals the nuances of engagement and outcomes, allowing you to create targeted program adjustments. That’s the key to maintaining a dynamic, relevant, and effective corporate wellness program over time.

Cultural Relevance and Inclusivity

Workplace wellness programs aren’t a one-size-fits-all solution to employee well-being problems. Instead of measuring broad participation rates, ensure you dive into demographic-specific data. This way, it’ll be easier to tailor programs more effectively and understand what incentives work for whom – and why.

Correlation vs. Causation

Finally, while high participation rates in a workplace wellness program may correlate with improved health outcomes, it doesn’t necessarily mean they caused them. Back to the data analysis stage, ensure you dive deep to confirm if the incentives directly lead to the desired health outcomes or if other factors are at play.

Key Takeaways

The true measure of an employee wellness incentive program goes beyond a hard ROI.

Experts at the Health Enhancement Research Organization aptly put it, “ROI as a sole measure of wellness incentive programs is an inadequate and incomplete measure of a wellness program’s performance.”

A wellness program that encourages employees to adopt and build healthy behaviors over time makes it easier to achieve both a positive ROI and a positive VOI (Value on Investment), which leads to useful metrics like improved employee morale, higher job satisfaction, increased productivity, and reduced turnover rates.

Remember, employees are people first and numbers on a spreadsheet second. If you can truly figure out what the person wants and support them, your wellness program will be an automatic success.

Workplace Wellness