Report calls for Government to give 'back to work' incentive

Article date: 12 October 2006

  • Tax credit to support employers to help people back towork

Despite the cost to the UK economy of £13.2 billion1a year, the incentives for employers to engage in activities thatwould reduce absence from work are weak. These are the findings ofa report by NERA Economic Consulting, “Sharing the costs -Reaping the benefits - Incentivising return to workinitiatives.”

Norwich Union Healthcare commissioned the research which looks atthe cost of absence (sickpay, overtime, labour replacement cost,the impacts on quality of service and productivity) as well as theeffect on other stakeholders for example, the NHS and incapacitybenefit budget2 . It also highlights how market failurereduces the likelihood of employers offering services which couldallow their staff to return to work quicker after sickness orinjury.
This market failure, the report said, is caused by a number offactors:

  • No one stakeholder has an over-riding incentive to invest inearly intervention through the workplace
  • The supply market for workplace health interventions andrehabilition (ie using physiotherapy and psychological therapies)is weak, partly because of low demand and lack of innovation inproduct design
  • Employers are well placed to provide workplace interventionsbut levels of investment remain low (as employers bear only partof the cost of absence – with society bearing the majorityof the costs)
  • The benefits of early intervention accrue over long timeperiod, so an employer investing now may not see a return on thatinvestment if an employee switches jobs
  • The NHS does not prioritise return to work over and aboveother patients’ needs. 85%3 of GPs believeprovision for rehabilition and return to work services arepoor.

The report suggests that fiscal incentives,for example match funding or tax credits could be an efficient andeffective way of encouraging take up of activity which has a widersocial and economic value.

Edward Bramley-Harker, of NERA economic consulting, said:“Norwich Union Healthcare asked us to investigate the casefor encouraging employers to invest in workplace health andrehabilitation services. The research has highlighted scientificliterature and case studies which show that the use ofinterventions can reduce the costs of sickness and get people backinto work quicker, but that this would need to beincentivised.”

Tim Baker, commercial director, Norwich Union Healthcare said:“The report seeks to stimulate the debate on the role of taxincentives in encouraging employers to engage with workplace healthand rehabilition services. It shows how the market is failing atthe moment but how, with a change in relationship between thestakeholders, we could begin to tackle the problem of sickness andabsence in the workplace."

Download "Sharing the costs – Reaping the benefits– Incentivising return to work initiatives" PDF(290KB)


1 Absence minded: Absences and Labour Turnover 2006,CBI2 Two cases studies are included in the report andlooks at the costs of the two leading causes of absence;musculosketetal disorder and mental illness (including stress),their cost to society and business and how these can be reducedthrough workplace interventions.
3 From research conducted on behalf of NUHC earlier thisyear. See press release 12 July 2006

Press office contacts:

Cheryl Cox 01904 452791 Out of hours 07800 695275
Louise Soulsby 01904 452617 Out of hours 07800 699 526

* Enquires regarding interviews with the author of the reportEdward Bramley Harker will be managed through Norwich Union’spress office.

Notes to editors:
The full report was commissioned byNorwich Union Healthcare and undertaken by NERA Consulting. It canbe found at

Edward will present the report to the ABI Health Conference onTuesday 17 October at The Royal College of Physicians.

About NERA Consulting
NERA provides practicaleconomic advice related to highly complex business and legal issuesarising from competition, regulation, public policy, strategy,finance, and litigation. Our 45 years of experience creatingstrategies, studies, reports, expert testimony, and policyrecommendations reflects our specialization in industrial andfinancial economics. Because of our commitment to deliver unbiasedfindings, we are widely recognized for our independence. Ourclients come to us expecting integrity; they understand thissometimes calls for their willingness to listen to unexpected oreven unwelcome news.

NERA Economic Consulting (, founded in 1961 asNational Economic Research Associates, is a unit of MercerSpecialty Consulting, an MMC company.

About Norwich Union Healthcare
Norwich UnionHealthcare was founded in 1990 as the healthcare arm of NorwichUnion and now provides a range of income protection and privatehealth insurance products that cover over 870,000 lives. It is oneof the largest providers of income protection and private healthinsurance in the UK.

Norwich Union acquired Occupational Health provider, Private HealthCare, in October 2005. We now offer an extensive range ofoccupational health services to corporate clients. These servicesare delivered by Norwich Union Occupational Health Ltd. NorwichUnion Healthcare is authorised and regulated by the FinancialServices Authority and is a member of the Association of BritishInsurers and the Financial Ombudsman Service.

Norwich Union’s news releases and a selection of images areavailable from Aviva’s internet press centre

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