Battle of the eaps

The more sophisticated employee assistance programmes cater for such a wide range of employee and employer requirements that quantifying their return on investment is never likely to be an exact science.

In addition to the confidential objective counselling services offered to employees – typically for up to six telephone-based or face-to-face sessions – and the array of helplines to assist with legal, financial and other issues, EAPs can produce detailed management information to help employers combat absenteeism and presenteeism. They can also help employers satisfy duty of care requirements and provide management consultation services to help managers tackle people-related issues such as poor performance, poor work relationships and stress.

Some providers refer to research that shows that employers who offer EAPs can enjoy a return on investment (ROI) equivalent to 15 times their investment and that in a worst-case scenario they will at least break even. Others are more cautious.

David Smith, secretary for the Employee Assistance Professionals Association (EAPA), says “There is no hard and fast ROI information out there but it is certainly true that most surveys have shown a positive outcome. A lot of ROI relates to health and safety issues but an EAP won’t make up for bad management.

“There are some very sophisticated ROI tools which EAP providers will give employers and one, which was developed at Harvard, covers all areas that an EAP will intervene in. But employers must have extensive data to put into this and, if the projections are presented to the board, the figures stated could give rise to expectations and reputational issues.”

Providers do, however, present a compelling argument that employers currently seeking to cut costs by sacrificing their EAP will be making a false economy. After all, the recession seems to have sent stress levels rocketing. Axa ICAS reports a 50 per cent increase in debt-related calls and a 30 per cent increase in redundancy-related calls during the opening months of this year. The prices of EAPs have also been falling, with all-singing-all-dancing versions now available for around £9 per employee per year for workforces totalling between 1,000 and 2,000 employees.

Nevertheless, the fact that some group risk, cash plan and private medical insurance (PMI) providers now automatically include EAPs within their products at no extra cost now means that employers can both cut costs and maintain an EAP – although the majority of these “free” EAPs are watered down versions which don’t offer face-to-face counselling and other more sophisticated features offered by providers such as Ceridian, PPC Worldwide and Axa ICAS.

Notable amongst the free offerings on offer is the one launched by Unum in November 2008 to all its group income protection (IP) clients. Not only does Unum enjoy a 48 per cent share of the group IP market but it’s EAP is a cut above most other free versions. It offers up to three face-to-face or telephone-based interviews per presenting issue, a basic level of management information, a free legal helpline and a non-clinical dimension that can match and reference services for childcare and eldercare. Furthermore, employers who want additional benefits can pay to enhance the package.

Legal & General, the only other group risk provider to offer a free EAP, introduced it five years ago for all its life, IP and critical illness cover (CI) schemes. Although this only provides a telephone-based service, employers can pay for an additional module offering up to six face-to-face counselling sessions per employee and most of the other components of a full-blown package – at a cost of only £3.76 per employee per year for a 2,000 strong workforce.

Critics of such free facilities argue that what is saved up front is inevitably paid for in other areas of the business. They point out, for example, that a free EAP can prevent you switching group risk insurers when other factors suggest it is a good idea to do so and that the service could fail to prove adequately resourced if usage becomes very heavy. The success of an EAP is also stressed to depend primarily on the extent to which you promote it, which requires significant investment in staff education and in integrating the EAP with other services, making the issue of whether you pay for the service directly relatively unimportant.

But a further attraction of not paying for your EAP is that this guarantees that it will not constitute a P11D liability in the hands of the employee – as long as the product it is incorporated in doesn’t either. HMRC guidance issued this March has indicated that there are limitations to the provision of legal and financial advice and to usage by dependents that must be complied with if paid-for EAPs are to avoid creating P11D liabilities.

Alex Bennett, head of health consulting at Aon Consulting, emphasises that both the free and more sophisticated EAPs can have their uses, with much depending on the requirements of the organisation concerned. He finds that EAPs can prove poor value when companies are getting take-up rates of below 11 per cent, and integrating them with other services is then unlikely to be a business priority. A free version may therefore be appropriate.

If, on the other hand, higher take-up rates are being achieved, then he emphasises that it can be worth paying for one of the more costly formats, basing selection on factors such as whether they provide advice for line managers on how to tackle employee problems, the time that it might take for an employee to get access to face-to-face counselling and how that individual is controlled, and the qualifications of those who access the calls.

He says “We believe EAPs are best value when fully integrated with absence management, healthcare benefits and long-term disability because then they are at least likely to pay for themselves by reduced claims, and the trick is to have the controls in place to prove they are doing this.”

But as most existing EAP contracts only run for a year, it would be no surprise if we start to experience a clear trend in the near future in the direction of free EAPs from employers seeking to cut costs. So far no group risk providers admit to having lost business as a result of the availability of free EAP alternatives but some acknowledge that Unum’s move means there is a risk of this happening at renewal. They could therefore decide that they have little alternative but to start offering free EAPs themselves.

Norwich Union – which currently offers discounts on EAPs to all corporate health insurance customers – admits that it is currently exploring the opportunities that including an EAP automatically within a group risk product could give it. Bupa, which offers discounts on EAPs when multiple products are involved but denies rumours that it offers free EAPs, also admits that it would have to have a serious look at switching to the free route if all the other players started doing so.

Friends Provident, which doesn’t even offer an EAP as an add-on, doesn’t altogether rule out offering a free one but Aegon Scottish Equitable, which also doesn’t offer an EAP as an add-on, seems intent on standing its ground.

Simon Bailey, head of marketing, employee benefits, at Aegon Scottish Equitable, says “We don’t think EAPs offer value for money because they have very low take-up rates and, although they can offer a wide range of benefits, many employees have access to more specialist sources of help. We believe that our RED ARC Care Advisory Service is more closely linked to what employees and employers want, and if you try and please all the people all the time you never get anywhere.”

European legislation will prove decisive

Wayne Pontin, Business Development Director, Jelf Group

Wayne Pontin, business development director at Jelf Group, feels that it will inevitably become standard for EAPs to be built into group risk and other healthcare products at no additional cost.

The fact that the approach avoids creating a possible P11D liability and the desire by larger corporates to improve employee benefits packages cost-effectively during the downturn will be contributory factors, as will European legislation.

“In my opinion I don’t think we are far away from a situation in which European legislation will insist on all employers offering some form of counselling, just like it has made it mandatory to provide eye tests for VDU users and screening for night time workers. I could see all firms with five or more employees having to provide counselling in around five years’ time.”

“In advance of this, health insurance and group risk providers will continue to build in EAPs at no extra cost. It is already a standard feature with the better cash plan providers, and Groupama Healthcare includes an EAP in some bespoke PMI products. In some cases EAPs can also be negotiated free of charge into PMI schemes offered by Standard Life Healthcare and Norwich Union Healthcare.”

Pontin feels that the trend will see the providers of paid-for EAPs having to switch the emphasis to offering broader absence management and occupational health services, which is what some of them are in fact already doing.