Measuring the ROI of your wellness programs is essential to justifying your wellness budget and refining your initiatives to align with employee needs.
A recent study shows that 95% of organizations that calculate the ROI of their wellness programs see positive results.
But how do you calculate the ROI of a program that contains intangible benefits?
In this article, we’ll cover how to measure the ROI of employee wellness programs, key metrics to consider, and, most importantly, provide a guide to measuring ROI.
Let's get started.
The Rise of Employee Wellness Investments
Employee wellness programs have become a must-have to help you reduce your healthcare costs, improve productivity, and attract and retain talent.
Some of the factors that have contributed to the increase in employee wellness investments include:
- Modern Workplace Challenges: The unique pressures faced by employees today, such as chronic stress from tight deadlines, isolation for remote workers, and a blurring of boundaries between work and personal life, underscore the need for programs that address these challenges.
- Employee Expectations: Given the highlighted challenges, employees want more than just a salary and mandated benefits. They want flexibility in their work schedules, programs that help them cope with mental health issues, and programs that align with their lifestyles and cater to their life stages.
- Attracting Top Talent: Employee wellness initiatives have also become recruiting tools, with employers that have well-established, well-run wellness programs often standing out from competitors in the job market.
- Impact on Business Performance: A stressed and exhausted workforce can significantly impact productivity and the bottom line. Wellness programs have become essential more than ever to help reduce turnover, lowering recruitment and replacement costs.
- Crisis of Employee Engagement: Companies are experiencing steep declines in employee engagement, as teams feel unappreciated and undervalued. Wellness initiatives are effective drivers of employee engagement, as they show your team that you care for their well-being, keeping them happy and motivated.
Why Measuring Wellness Program ROI Matters
Implementing an employee wellness program is resource-intensive (capital and time). As such, it is reasonable to want to know that your investment is paying off.
Some of the reasons for measuring the outcomes of such programs include:
- Securing Executive Buy-in: Decision-makers want a cost-benefit analysis of the proposed wellness initiatives to establish that the programs are returning value. Partnering with a benefits broker will help you prepare a compelling business case, supported by industry benchmarks and comparative data.
- Prioritize Wellness Benefits: Measuring your wellness program's ROI helps you utilize limited funds for the initiatives with the greatest impact on employees’ well-being and the company’s business goals.
- Tie Benefits to Business Performance: Measuring ROI helps quantify the impact of your wellness programs on your business's performance. For example, corporate health and wellness programs help reduce employee absenteeism, which, in turn, improves productivity.
- Data-Driven Decisions to Enhance Program Design: You can track employee wellness engagement and utilization rates to identify initiatives that resonate with members and those that don’t. You can then leverage the data to gain insights into how to improve the wellness programs to better align with employees’ needs and preferences.
Key Metrics to Measure Wellness ROI
Measuring the ROI on your wellness program is not only about justifying the financial expenditure. The primary goal should be to provide a premium wellness experience while keeping your expenses manageable.
Below are the top metrics to keep an eye on:
- Engagement Metrics: Your employees' participation in the wellness initiatives is an early indicator of the program's success. First, determine how many of your employees enroll in the program. Follow that up by determining their active participation rates, since they might sign up but never utilize the programs.
- Health Outcomes: For you to consider a wellness program a success, you should observe improvements in your employees' health. For example, employees receive better health screening results and a lower prevalence of risk factors for chronic disease, such as high blood pressure.
- Productivity Metrics: This involves measuring your employees' KPIs, such as individual and team project completion rates. You should also consider customer satisfaction rates and product quality, especially for manufacturers, as these factors reflect your team’s work engagement.
- Employee Satisfaction: Conduct surveys to assess your employees' satisfaction with the wellness programs. You should also compare the rate of employee retention among those participating in the programs versus those not enrolled.
- Financial Metrics: A reduction in healthcare costs indicates that your wellness programs are contributing to healthier lifestyles among your employees. Examples of lower costs include changes in your insurance premiums and a lower incidence of high-cost care.
How to Measure ROI on Employee Wellness Programs
We have laid the foundation for why measuring the ROI of wellness programs helps you deliver a holistic experience for your team.
Now, let’s look at a step-by-step guide to calculating the ROI of your wellness programs:
1. Establish Baseline Metrics
Before you implement a new employee wellness program or expand an existing one, it is essential to record the current state of all the key metrics mentioned earlier.
This includes healthcare claims per employee, the average number of absentee days per employee, employee engagement scores, and relevant health screening averages.
2. Define SMART Wellness Goals
Outline SMART (specific, measurable, achievable, relevant, and time-bound) to keep your ROI measurement focused and provide a framework for assessing your wellness programs’ effectiveness.
An example of a SMART wellness goal is reducing the average number of employee absentee days by 0.5 days over 12 months. Another example is increasing your employees' participation in mental health programs to 60% within 12 months.
You can then use these goals to help you evaluate the effectiveness of your wellness initiatives in the future.
3. Track Program Costs
Track your wellness program budget just as you would any other project.
That includes vendor costs, program incentives and rewards, facilities and equipment costs (such as gym and other sporting venue rentals), and software costs.
Proper record keeping helps you conduct a cost-benefit analysis of your wellness program, including healthcare costs per employee and the savings from reduced absenteeism.
4. Monitor Engagement Throughout
Track your employees' engagement with the new wellness program. You can conduct weekly assessments and compile them into monthly reports to determine enrolment and participation rates.
Regular tracking also helps you identify drop-offs or slowdowns in participation, allowing you to adjust your communications and incentive strategies to boost engagement.
5. Measure Post-Implementation Outcomes
Determine all the benefits of the new health and wellness program and compare them with the baseline data. You can do this at pre-determined intervals of 3 or 6 months to ensure you get a clear picture of the progress made.
Remember that some results take time. For example, it might take 12 to 18 months to see changes in chronic disease incidence and healthcare costs, which is why they are categorized as long-term impacts.
6. Calculate ROI
Determine your employee wellness program’s ROI as a share of the expenses incurred to create, implement, and administer it. The formula for calculating ROI is:
Examples of benefits include lower labor costs resulting from fewer employee absences or sick days, lower medical costs due to fewer employee claims, and lower hiring and training costs associated with higher employee retention.
7. Continuous Reviews and Improvements
Regularly assess your wellness program and refine it to align with your employees' wellness goals. For example, conduct employee benefits surveys to determine whether employees like the offered wellness benefits.
This helps you prioritize the most useful wellness initiatives and reallocate funds to programs that drive real impact for your team and company.
Part of contextualizing your wellness program’s ROI is understanding its current performance to determine whether it meets your employees’ needs.
Use our free wellness program audit checklist to identify gaps in engagement, incentive design, and implementation effort. We can also partner to address the identified gaps, so your wellness program aligns better with what your employees want. This boosts employee enrollment and participation, often leading to higher ROI.
Unlike other wellness vendors, we have no PEPM access fees and don’t tie you down with a contract. Also, we have the only wellness-focused incentives marketplace to help you boost employee engagement.
Book a one-on-one call today to learn about our wellness product packages.
Industry Benchmarks: What Good Wellness Program ROI Looks Like
The ROI of wellness programs isn’t set in stone and varies depending on the initiatives, sector, company size, and budget. However, we can set expectations for engagement and utilization regardless of the wellness programs.
So what numbers should you expect? Let’s explore what a realistic ROI for a wellness program actually is:
Engagement Benchmarks
A high employee enrollment rate of at least 50% of your staff is an excellent indicator that the wellness program is off to a good start. However, the enrollment rate should rise to about 80% with proper communication and training.
Beyond enrollment, at least three-quarters of the participants should utilize the wellness programs regularly to justify the program's spending.
Programs with incentives might see sharper increases in enrollment and engagement.
Financial Returns
A good benchmark for financial gains is a $2 return for every $1 invested in your wellness program.
However, it might take longer to see financial returns, since your employees must actively participate in the program to realize the long-term health benefits of a wellness lifestyle. This could take between 12 and 24 months.
Employee Satisfaction Indicators
Employee survey responses indicating higher satisfaction with their benefits indicate that your wellness program is having the desired effect on them. SurveyMonkey recommends targeting an eNPS score of 10-30 or higher, indicating that employee sentiment is generally positive.
Other signs of a successful program include increased popularity on employer review platforms and a reduction in voluntary turnover among program participants.
What Drives High ROI Wellness Programs
Want to design an employee wellness program that consistently delivers a high ROI?
Consider the following elements:
- Personalization for Employee Needs: One-size-fits-all wellness programs often fail because they neglect employees’ unique needs. Tailor wellness programs to reflect your team’s demographics. For example, new parents in the office may struggle to maintain the same wellness routines as single employees, as they often face different challenges with their work-life balance.
- Wellness Incentives: Offer thoughtful wellness gifts to boost program enrollment, participation, and completion. For example, you could create a tiered set of incentives that motivate your employees to complete specific milestones. Download our free ebook to learn how you can use psychology-based incentives to drive participation in your wellness programs and increase overall ROI.
- Employee Engagement: Your wellness program should include employee engagement activities that promote community building and foster friendly competition among your employees. Examples of such initiatives include wellness challenges, skill swap sessions, office trivia, and hobby zones.
- Leadership Buy-In: Your employee wellness program requires visible support from your organization’s executive, not just budgetary support. Their involvement signals to the employees that wellness is a priority, not just a temporary addition. Executive engagement also reduces stigma on wellness topics such as mental health.
- Holistic Approach: A comprehensive employee wellness program addresses the core factors that affect work performance: physical, mental, social, and financial well-being.
- User-friendly platforms: Ensure the platforms your employees use to enrol and participate in wellness programs are user-friendly. Challenges signing up might lead to a drop in your wellness program’s adoption rates.
Common Challenges in Measuring Wellness Program ROI
Calculating the ROI of your wellness program can be challenging, especially when assigning monetary value to outcomes such as improved employee engagement or job satisfaction.
However, you can still control other aspects of the evaluation to make your ROI findings as reliable as possible.
Watch out for the following pitfalls when determining the impact of your employee wellness programs:
- Attribution Difficulty: Numerous internal and external factors beyond your wellness program can influence your employees' health, wellness, and, subsequently, their productivity. This can make it challenging to attribute performance improvements solely to the program. However, you can isolate the program's impact by designing a model that utilizes a control group that does not use the program and comparing cohorts enrolled in different initiatives within the program.
- Missing Baseline Data: Many businesses implement employee wellness programs without collecting baseline data, leaving year-end ROI calculations speculative at best. You should gather all necessary data before launching your program. If you do not have sufficient historical data, begin collecting it immediately and document reasonable assumptions to improve later assessments.
- Obsession with Financial Metrics: Many employers focus on the impact their wellness programs have on their bottom line. This means they miss out on other benefits, such as enhanced employee engagement and retention, as well as a stronger employer reputation. To get an accurate picture of your wellness program's impact, use a balanced scorecard that considers its impact on all core metrics.
- Resource Constraints for Evaluation: Small and medium-sized businesses often lack the resources to invest in analytics software that can help HR accurately evaluate the impact of wellness programs. Partner with a benefits broker or wellness platform like SoHookd to access the expertise you need to determine the ROI of your wellness programs.
Frequently Asked Questions (FAQs)
Here are answers to common questions we receive from our clients about wellness programs:
What Types of Rewards Improve Wellness Participation?
Rewards that offer a direct financial benefit or experiential wellness often have the most significant impact on participation in wellness programs.
Examples include cash bonuses, gift cards, and subsidized gym memberships.
What Are the Top Mistakes When Launching a Wellness Program?
The top mistakes when launching a wellness program include poor communication, insufficient executive support, and ignoring employee sentiment.
Others include implementing a one-size-fits-all program and making employee participation mandatory.
How Often Should a Wellness Program Be Updated?
You should update your wellness program annually after gathering sufficient data on its outcomes.
However, you should also make monthly or quarterly adjustments to elements such as communication and incentives to boost employee engagement, which will affect long-term ROI.
Conclusion
Measuring the ROI of your employee wellness program begins long before implementation and continues throughout it. Additionally, you must identify the right metrics to track in order to get a clear picture of how your employees feel about your wellness programs and which initiatives matter to them.
If the ROI falls below the target scores, consider refining your wellness program. And this is where we come in.
At SoHookd, we offer flexible wellness programs that you can curate to your employees’ needs and launch within two weeks. You can build your own wellness program and implement it as a standalone or to complement your existing wellness programs.
Additionally, we have nearly 10 years of wellness expertise and will help you track the key metrics needed to optimize your wellness programs.
Ready to optimize the ROI of your wellness programs? Schedule a call today.
