EAP: An Employee Benefit that Yields Organizational Returns?

The Bitter Reality

Most organizations simply accept the fact that in order to be competitive and lure in (and retain) quality employees, they must offer a generous benefits package. The fact is that the benefits provided are a bottom line expense that provides the organization with little or no fiscal returns. These fringe benefits (Health insurance, dental, short and long-term disability, vacation/sick days, holiday pay, education, parking, taxes, workers compensation, and unemployment insurance) amount to an average of 15-25% of an organization's annual payroll expenses. This doesn't even include the cost of other perks such as direct deposit, administering flexible spending, and providing and of contributing to employee pension plans or 401K retirement plans. This article intends to demonstrate that unlike other fringe benefits, an available and utilized EAP results in measurable bottom line savings for organizations.

Measurable Costs

In an economy where organizations have realized there is a limit to how many more products or services can be sold to bring up the bottom line profits, they have begun to look within for ways to operate more efficiently and reduce unnecessary expenses. Out of this philosophical approach to better business, terms like risk management and loss prevention have emerged. Risk management is the process of analyzing exposure to risk and determining how to best handle such exposure. Loss prevention is efforts that focus on changing a particular behavior, procedure, environment, or employee interaction that is prone to hazard or risk. Many of these variables are organization and industry specific. Two measurable variables that are enormously expensive and cut across all businesses are: absenteeism and turnover.

Absenteeism: It has been found that 15% of the work force is responsible for 90% of the absenteeism. It has been further shown that emotional factors account for 61% of time lost through absenteeism. The average cost of absenteeism per employee per year in 2002 was $789.

Turnover: According to the Labor Bureau of Statistics (2004) the average organization has 36% employee turnover annually. 20% of this is voluntary and 16% is due to performance related issues. What's worse is that only 15% of terminations are the result of an employee's inability to perform their job duties. Personal and interpersonal factors account for 65-80% of all terminations. Conservative estimates say that the loss of one person is equal to their annual salary (Logos Research, 2004). William Bliss (2003) noted that the cost to an organization for losing a managerial or sales position is likely 200-250% of their annual compensation. It's also projected that it takes 13 months for the average new employee to reach maximum efficiency in performance. A Diamond in the Rough: EAP

Amid the cost of fringe benefits is EAP. Tending to be one of the small ticket items in that package of benefits, it is also the only one that has the potential to deliver both service to your employees as well as fiscal dividends to the organization. In many cases these saving are substantial, computable, and tangible.

Measurable Savings

Absenteeism: Organizations that make performance based referrals to their EAP are often able to see significant differences with specific employees very quickly. Remember 61% of those absenteeism issues are related to emotional issues. Year-end calculation will reveal your savings by using your EAP to curb absenteeism.

Turnover: The organization's answer to bottom line savings in this area is employee retention. Making other performance based referrals to the EAP for such issues as attitudinal problems, anger problems, and coworker conflicts, to name a few, can result in resolution of problems and retention of employees. Every employee referred to the EAP that is retained is money in the bank. In many cases having employees know about the EAP is enough to increase retention. A survey by Hoechst Celanese found that awareness of an organization's EAP increased the probability (by 40%) of those employees staying with the organization for three more years over those who did not know about the EAP.

Human Resource Consultation: Another benefit of an EAP is the ability for Human Resource personnel, supervisors and other managers to consult on employee matters. Many professional HR consultants charge between $150-$200 an hour. The measured hours of consultation provided as part of the EAP service is additional savings to any organization.

Medical/Work Comp Premiums: Organizations that utilize their EAP often find that there is a lower annual premiums increase in their medical and work comp insurance. This ends up being a function of lower utilization of medical benefits, and fewer accidents on the job. Studies over 25 years at Kaiser-Permanente showed that after one mental health visit, medical utilization decreased an average of 60%.

The Numbers: Research has shown that EAP saves money. The U.S. Department of Labor (1990) found that for every dollar an organization invested in an EAP, they generally saved anywhere from $5 to $16. Ford Motor Company and General Motors both reported savings of $9 for every dollar spent on their EAP.

Soft Dollar Savings

In the vein of loss prevention comes soft dollar savings, which are less measurable, but many would say no less real than hard savings. A good EAP will provide a wide range of trainings and presentations designed to assist an organization in loss prevention. Sexual harassment trainings and policies are in place to protect the rights of everyone. They also help avoid costly law suits. According to the Human Resource Institute (2003) the average sexual harassment claim awards $650,000 and leaves an organization with another $80,000-$100,000 in legal and court fees. The National Safe Workplace Institute (1997) reported the average workplace violence claim awards $250,000.

Conclusion

When an organization begins to evaluate their exposure to risks and determine methods of minimizing those risks without adding cost, an EAP like T.E.A.M., Inc. should be an obvious choice. T.E.A.M., Inc. is committed to helping organizations prevent loss and retain assets. Simply having an EAP will not yield the type of results talked about in this article. First, it requires having a management team educated about the benefits of an EAP and knowledgeable about how to use the EAP. Second, it requires an EAP that does what it says. T.E.A.M., Inc. is an investment in presence. We will be available at any time by phone, in person, or at your job site. We are committed to proving that our services will measurably pay for themselves year after year.

DISTINCTIVE SERVICES

In addition to the normal services that most EAP's offer, T.E.A.M., Inc. offers a few unique services as well.

Drug Testing Administration: T.E.A.M., Inc. is the only EAP that also offers third party administration (TPA) of organization's alcohol and drug programs. We are able to help design and write policies, educate organizations on the value and purpose of alcohol and drug programs as well as administer the entire program on your behalf.

Case Management: T.E.A.M., Inc. is one of the few EAP's that can provide case management and utilization review of organization's self-insured medical benefits for mental health and substance abuse. Our highly trained staff is committed to ensuring employees get the help they need and the organization pay only for what is medically necessary. A study performed at Southern California Edison determined that EAP case management of substance abuse healthcare claims was actually more effective at reducing overall healthcare claim costs than the company's health plan alone.