How To Measure & Increase ROI of Employee Wellness Programs: Key Metrics Explained

Wellness programs have undergone various changes over time. These have now become more like strategic investments rather than optional perks, helping businesses navigate challenges like rising healthcare costs, burnout, and employee turnover.

The demand for wellness programs in the corporate sector began in the 70s. In the 2000s, employers' interest in incorporating a wellness program surged due to high healthcare costs and increased awareness about its benefits.

However, employers saw that gaining a return on investment (ROI) in wellness programs took quite some time. According to a 2013 study by RAND on workplace wellness programs, employees who participated in wellness programs for at least five years saw a slight decrease in their healthcare expenses.

So, it seems that getting a proper ROI on a wellness program takes ample time. And if you are calculating to get your ROI immediately after investing in a wellness program, you have to hold your horses.

Here's an insight about Johnson & Johnson's wellness program ROI:

The company saved over $250 million in healthcare costs in a decade from 2002 to 2008. This means Johnson & Johnson saw an ROI of $2.71 on every $1 spent in the wellness program.

Focusing on ROI is a good way to build a profitable business, but there's another factor to note which is VOI or Value on Investment. Well, we will definitely get to this term later in this blog.

Coming back to the primary discussion, are you looking to increase your worksite wellness ROI and learn how to measure the success of a corporate wellness program? If so, this blog will surely help. It will cover ROI, VOI, and their key metrics and how to measure them effectively.

What is ROI in Wellness programs?

ROI (Return on Investment) measures the financial impact of an investment, indicating profit or loss. In the context of wellness programs, it reflects cost savings and productivity gains.

The end goal of measuring ROI is to understand the tangible cost gains and employee productivity gains. However, the tricky part is keeping track of the metrics affecting ROI.

To help you out, here are some standard metrics that business leaders use to measure ROI in wellness programs:

• Healthcare cost savings
• Productivity gains
• Absenteeism rate
• Turnover cost

The question here is how to use the above metrics to calculate ROI. Most importantly, what is the formula for calculating ROI? To properly use the metrics, collecting pre- and post-wellness program data is essential.

Here's an instance of calculating healthcare cost savings:

Pre-program annual cost per employee: $5,000

Post-program annual cost per employee: $4,500

Savings per employee = $500

Now, let's look into the formula and its breakdown for ROI calculation:

The benefits gained in the above equation are nothing but quantifiable savings. Here is how employers can calculate the benefit:

a) Healthcare Cost Savings: = Total Pre-program Healthcare Costs−Total Post-program Healthcare Costs

b) Absenteeism Savings = (Average Daily Wage × Reduced Absenteeism Days)
c) Productivity Gains = (Improved Output per Employee × Number of Employees)

d) Turnover Costs Savings = Cost of Hiring and Training per Employee × Reduction in Turnover Rate (as a decimal fraction)

Benefits Gained = Healthcare Cost Savings + Absenteeism Savings + Productivity Gains + Turnover Costs Savings

So, keeping track of the ROI key metrics will help quantify the wellness program's success monetarily.

Why Isn't Focusing Only on ROI Enough?

Calculating ROI is crucial for businesses to learn whether their financial investment is worthwhile. It is understandable that business leaders will work their best to gain more profit than loss.

But, in the case of wellness programs, there are more things to consider than just financial gains. Meeting ROI goals is reasonable, but its effect is mostly short-lived. So, there's another key factor to consider, which I mentioned at the beginning.

Keeping a note of this factor is as important as ROI. It offers intangible benefits, but their impact is long-lasting for businesses.

What is VOI in wellness programs?

VOI (Value on Investment) focuses on qualitative and long-term benefits, such as employee morale, satisfaction, and organizational culture. VOI metrics include:

• Productivity
• Employee morale
• Retention
• Satisfaction

VOI also encompasses the metrics used to track ROI. So, it can be said Value on Investment can give an overview of a wellness program's success and effectiveness.

The VOI of wellness programs includes intangible benefits like improved employee morale, satisfaction, and a stronger work culture. So, along with ROI, VOI is another metric worth focusing on when investing in an employee wellness program.

Unlike ROI, there is no specified formula to calculate VOI. Business leaders commonly carry out employee retention and engagement surveys or follow the Net Promoter Score to calculate VOI.

ROI vs. VOI: Why Both Matter?

ROI and VOI are two pieces of a jigsaw puzzle that work together. By combining both parameters, employers get a holistic view of the wellness program's success rate.

Here's a brief breakdown of how ROI and VOI complement each other in measuring a wellness program's success.

What Are Some Strategies To Maximize ROI And VOI In Wellness Programs?

1. Adopt a holistic approach

Wellness programs can drive ROI and VOI successfully when they address physical, mental, and emotional well-being to yield holistic benefits.

2. Focus on your employee needs

Wellness programs can yield ideal ROI and VOI if they fulfill employees' wellness requirements. Here's a scenario of how employers can maximize ROI and VOI by focusing on employees' health needs.

A company's HR integrates the wellness platform Vantage Fit, which tracks its employees' daily steps.

Vantage Fit tracked employees' daily steps for a month and found that only 30% met the ideal 7,000–10,000 step range, while the rest fell below 5,000. Based on this data, HR introduced tailored wellness initiatives to encourage movement, ultimately reducing chronic illness risks and healthcare costs.

The above is a simple example of how HR can understand their employees' health requirements, offer wellness initiatives accordingly, and promote their well-being in the long run.

3. Engage the leadership of the organization

As leadership expert John Maxwell once said, ‘A leader is one who knows the way, shows the way, and leads the way.’ Active participation from company leaders can significantly boost employee engagement in wellness programs.

4. Integrate the latest technology

Leveraging the latest technology in the wellness industry will help you reach your business goals seamlessly. For example, you can join hands with a wellness platform like Vantage Fit to track and manage health data efficiently to increase ROI and VOI.

5. Offer diverse options

The wellness program should cover all kinds of wellness plans, such as mindfulness challenges, office fitness challenges, outdoor activity challenges, and so on. Offering diverse wellness options increases the wellness program's success rate and can bring in the desired ROI and VOI.

6. Continuously evaluate

Be it a wellness program, business initiative, or personal goal, continuous evaluation helps identify strengths, weaknesses, and areas for improvement. So, regular assessment of the wellness program is how you can measure if it can deliver the desired ROI and VOI.

With the assessment results, you can restrategize or recalibrate the existing program.

Bottom Line

Keeping track of the ROI of employee wellness programs is a strategic move that benefits both employees and employers in the long run. Along with ROI, monitoring VOI is equally essential to gain a 360-degree view of a wellness program’s effectiveness.

By calculating and recording both these parameters, employers and business leaders can implement a sustainable wellness program that fosters a healthier work environment.

Ultimately, investing in employee well-being goes beyond financial returns—it’s about building a happier, more engaged, and productive workforce for long-term success

Frequently Asked Questions

1. How much can a company save by implementing a wellness program?

A Harvard Business Review study found that companies save an average of $3 for every $1 spent on wellness programs, primarily through reduced healthcare claims and improved employee productivity. Simply put, creating and implementing a wellness program properly can help increase ROI.

2. What is the average cost of a wellness program per employee?

The average cost of wellness programs varies, ranging from $150 to $1,200 annually per employee.

3. Why don't corporate wellness programs work?

Most corporate wellness programs don't work because of poorly designed structures, lack of leadership motivation, and low engagement and participation rates.

4. Who will benefit the most from workplace wellness programs?

There are numerous benefits of wellness programs. However, workplace wellness initiatives are especially beneficial for high-risk employees with chronic illnesses or low daily steps.

5. Do wellness programs reduce healthcare costs?

Yes. If properly planned and implemented, wellness programs can reduce healthcare costs.

6. What are some employee wellness statistics?

About 70 percent of employees with access to wellness programs report better job satisfaction. And 85 percent of employees say they are more likely to stay in an organization where employers promote well-being. To learn about employee wellness statistics, read our comprehensive blog.

7. Is there a link between stock market price growth and having a great employee wellness program?

Yes. Companies that offer robust wellness programs perform better in the stock market due to higher employee productivity and reduced costs.