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Illness costs employers $2 billion per year

Media Release
2 April 2009

Illness costs employers $2 billion per year

The cost of illness to New Zealand employers is likely to be more than $1,500 per employee, or over $2 billion across the whole workforce, according to new research findings[1].

Surprisingly, the research conducted by not-for-profit health insurer Southern Cross Medical Care Society, shows the biggest part of those costs is not absence from work but lost productivity of employees who still go to work when they’re sick.

Southern Cross Health Insurance Chief Executive, Peter Tynan, says the research sheds new light on the true cost of illness to employers, and points to the benefits of initiatives to enhance workforce health.

“The cost to businesses are far greater than simply the amount of sick days taken. This research shows that the impact on productivity when employees come to work unwell represents a potentially bigger cost,” he says.

The research found the average time off work due to illness was 4.2 days per year, while the average number of days where employees went to work when they were too sick to be fully functioning and productive was 11.1 days.

“If you assume an unwell employee is half as productive as they normally would be, the cost to employers for a staff member on the average wage is around $900. That’s a higher average annual cost to employers than days off work, which is around $700 per employee[2].

“Multiply those numbers by the equivalent of 1.4 million full time workers in the New Zealand workforce and you have a $2 billion impact on productivity.”

Mr Tynan said the research points to some Kiwi workers having difficulty accessing affordable healthcare for longer term health problems.

“Employees who have the most days of absence also have the largest incidence of going to work when they’re unwell. This suggests chronic, longer term illnesses that in some cases might require surgery or expensive diagnostic procedures.

“Public health system waiting lists and the cost of private healthcare options can represent very large barriers for low to middle income earners. An employer providing subsidised health insurance for staff can help break down those barriers and see a return on their investment through chronically ill staff returning to full productivity.”

Mr Tynan believes a growing number of businesses are taking steps to combat employee illness.

“More than 200,000 of Southern Cross’840,000 members are in group schemes where the employer pays some or all of their employees’ health insurance premiums. And that number had been increasing slowly but steadily in recent years.

“Southern Cross has also been helping employers to implement health and wellness programmes - from traditional health insurance to health-focused seminars, and basic health checks. Many businesses are investing in these kinds of initiatives.”

The Southern Cross research confirmed around two-thirds (63%) of employees are offered some health and wellness interventions in the workplace - the most common being flu vaccinations, workstation assessments and stress support.

Dr Ian McPherson, Chief Executive of the Southern Cross Healthcare Group (which incorporates the Southern Cross health insurance business, as well as Southern Cross Hospitals and Southern Cross Travel Insurance) says the research findings are a wake-up call. “This research demonstrates the big potential payoff for our economy from preventing illness in the workforce and the population at large.”


1. Survey of 461 NZ workers by tns CONVERSA in January 2009
2. Based on information from Statistics NZ: average day is 7.5 hours at an average cost of $24/hr. The cost to the employer of an absentee day is replacement labour; while presentee days are estimated at 50% of a full day because of reduced output.

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