ROI vs. VOI: Which metric should companies use to evaluate their employee wellness programs?
In the business world, it’s all about £££. Whether it’s the sales team hiring another employee, the marketing team conducting a paid campaign, or the HR team implementing employee wellness programs, justifying the move in terms of the bottom line will more often than not be necessary. But doing so is not always straightforward. When it comes to abstract, highly impactful initiatives like employee wellness programs, it can be challenging to assess the value and ensure the investment is worth it. In this Pacific Prime UK article, we take a closer look at two metrics: return on investment (ROI) and value on investment (VOI).
What are the benefits of employee wellness programs for companies?
Before we begin unpacking ROI and VOI for employee wellness programs, let’s quickly recap on what these are and why companies offer them. Employee wellness programs are a set of initiatives that seek to improve the overall health of employees. Some examples include: health screening/health risk assessments, smoking cessation programs, food and nutrition education, mindfulness sessions, access to counselling, and more. Perhaps unsurprisingly, employee wellness programs are appreciated by employees, thereby helping a company attract and retain top talent.
But, the benefits of employee wellness programs for companies don’t end there. These programs also have impact on the bottom line by:
- Increased productivity and output: Happy and healthy employees are motivated and take fewer sick leave, which will see presenteeism and absenteeism rate decrease and productivity and output rate increase.
- Decreased turnover costs: Happy employees are also more loyal and less likely to quit their jobs. This saves the company having to advertise vacancies, interview, hire, and onboard new employees – all of which are time consuming and costly.
Why do companies need to measure the impact of employee wellness programs?
Clearly, companies have a lot to gain by offering wellness programs. That being said, the costs of these programs can often be quite high, and can put a dent on companies’ balance sheets – particularly if the programs aren’t actually in line with companies’ goals or meeting the needs of their employees. In light of the global economic downturn caused by the COVID-19 pandemic, this can pose a real threat to profitability, wage increases, jobs, and even company survival. As such, there’s a pragmatic need to measure employee wellness programs’ impact (and refine them to ensure that they’re optimal).
But the data shows that:
27% of organisations are unable to create a business case for providing employee wellness benefits.
This is despite the fact that:
68% of employers said that spending money on health and wellbeing had grown in importance for them in the past two years.
ROI vs VOI for employee wellness programs: How do the two metrics differ?
In the employee wellness space, there are two primary evaluation methods that companies can use to measure the impact of their employee wellness program: ROI and VOI. These are used to assess the value of the program and ensure the investment is worth it. In other words, that the resources poured into the program aren’t slipping through the cracks and that employees are actually benefiting from them, leading to tangible or intangible benefits for the company – all of which should be favourable on the balance sheet.
Return on investment (ROI)
ROI is the financial return that a company receives on any given financial investment. Put simply, if a company invests £100 and makes £200 from it, then the ROI is 100%. This is the formula for ROI:
ROI (%) = ((Return – Investment) / Investment) * 100
As you might have guessed from the above formula, ROI is focused on the tangible, monetary return. It’s somewhat easier to measure as the outcome is directly related to the original investment.
For employee wellness programs, ROI is often related to the reduced healthcare costs. By investing in employees’ health, companies may have increased return in the form of lowered premiums on employees’ group health insurance plans.
Given that employers may spend on group health insurance plans for employees, the ROI of wellness programs refers to the savings they receive in that area once they’ve invested in their employees’ health.
Value on investment (VOI)
VOI is the overall value that a company receives on any given financial investment. It accounts for the financial return, as well as the more abstract value that was received from that investment.
Of course, VOI is not as easy to measure as ROI. This is because it’s more abstract and not quite as tangible. What’s more, the forms of outcomes might differ from the investment, and in some cases, the two can be difficult to compare.
That being said, many companies are attracted to VOI and have begun using it to evaluate their employee wellness programs. It’s far more encompassing than ROI, because it considers the invaluable benefits of employee health.
Linking back to the reasons why companies offer employee wellness programs (mentioned earlier on in this article), VOI looks at the value of:
- Employee morale, positivity, health, and happiness
- Decreased use of sick days
- Increased productivity
- Talent attraction and retention
- And of course, financial savings on group health insurance plans
Which metric should companies use to evaluate their employee wellness programs?
Both ROI and VOI can be incredibly useful tools for evaluating companies’ employee wellness programs. While VOI is more inclusive than ROI, it’s also more challenging to measure. That being said, before companies even get to the evaluation stage or choose a metric that works for them, they should first define what a successful program would look like and take into account their organisational culture and their culture of wellness. After all, no two companies are the same.
Here, we take a look at three factors that will help your company decide whether ROI or VOI is the better bet:
Success is the accomplishment of a goal. As such, it’s not possible to measure the success of an employee wellness program without first establishing some employee wellness program goals. Based on your goals, determine whether your program has a “people, “productivity” , or some other type of focus that lends well to using either ROI or VOI.
The size of your employee wellness program is another good indicator for the type of metric you should use. In the event that your program isn’t large or substantial enough to offer a large evaluation sample, you may find inaccuracies when trying to make only direct, financial evaluations.
In terms of the style of your employee wellness programs, consider the type of activities you offer. Is it focused on education, action, or something else? If you focus on overall employee wellbeing rather than simply physical health, you should consider VOI.
Need help designing, implementing, or evaluating your employee wellness program? Pacific Prime UK is at your service
As a global health insurance brokerage and employee benefits specialist, Pacific Prime UK is dedicated to helping companies of all sizes and industries design and implement tailored corporate health insurance and employee benefits solutions to meet their needs and budgetary requirements. We leverage our knowledge and experience in the sector to advise companies on their employee benefits objectives, continually providing support with regards to program evaluation and refinement.
If you’re relatively new to employee wellness programs, we recommend checking out our article on how to get started on your firm’s employee wellness program. Alternatively, you’re also more than welcome to reach out to a member of our corporate team. You’ll be able to learn more about our offerings, including value-added services and industry-leading technologies, and how we can help your company. Arrange a free, personalized consultation today!