Employers face higher bills for health benefits

The cost to UK companies of providing employee healthcare benefits is one of the highest in Europe, according to an independent study published today as worries about the NHS continue.

UK companies on average spend 7 per cent of their total payroll costs on healthcare schemes, compared with 5.3 per cent across Europe.

Only Switzerland (11.3 per cent), Bulgaria (8.8 per cent), Romania (7.5 per cent) and Turkey (7.3 per cent) pay a higher proportion of payroll costs on employee healthcare benefits, according to consultants Mercer, which surveyed almost 800 employers in 24 European countries.

This was still far lower than the US, where employers spend 15.4 per cent of payroll on health benefits.

Employers in European countries, such as the UK, which fund public health through general taxation, spend more on health benefits than countries that operate government-sponsored social insurance schemes, into which citizens pay directly, said Mercer.

It added: “This may reflect a concern that public health systems [funded out of general taxation] do not meet employers’ objectives and, hence, there is a greater perceived need to provide supplemental health benefits.”

The cost of healthcare schemes to employers has risen sharply in recent years – increasing by 5 per cent per employee last year across Europe as a whole and 5.9 per cent in the UK – as medical costs increased.

The average cost of providing medical cover for employees and dependants has risen by 67 per cent in he UK since 1999, according a separate survey conducted earlier this summer. This has placed an increasing burden on employers. More than half of European employees do not pay towards their employer-provided health benefits, compared with the US, where employees commonly pay around a quarter of the cost.

Despite the rising costs, many companies expected to maintain healthcare schemes in order to retain and attract staff. Some 41 per cent of European employers were unlikely to make any changes at all to their programmes, according to the consultants’ latest survey.

Concern over rising costs, however, was reflected in the fact that 38 per cent expected to restrict the scope of coverage, while 34 per cent said they would shift some of the cost to employees. Others were considering offering flexible benefits “to manage costs and better match employee requirements”, said Mercer.

Steve Clements, head of Mercer’s health and benefits business, said: “Over two- thirds of respondents said they would struggle to retain top-performing employees if they did not offer good health benefits. These programmes are particularly valued as a staff attraction tool by companies in emerging eastern European countries, where migration to western economies has produced a scarcity of talent.

“Health benefits often rank as the most highly valued company benefit in countries where employees perceive national health provision is relatively poor.”


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