According to an independent study published yesterday, the cost to UK companies providing employee healthcare benefits is one of the highest in Europe. The study shows that companies on average spend 7 percent of their total payroll costs on healthcare schemes, compared with 5.3 percent across Europe.

Consultants, Mercer surveyed almost 800 employers in 24 European countries and found that only Switzerland, Bulgaria, Romania and Turkey pay a higher proportion of payroll costs on employee healthcare benefits. Employers in the United States spend 15.4 percent of their 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 roughly 5 percent per employee last year across Europe as a whole and 5.9 percent in the UK – as medical costs increased.

The average cost of providing medical cover for employees and dependants has risen by 67 percent in the UK since 1999, according to a separate survey conducted last summer. Over half of European employees do not pay towards their employer-provided health benefits, compared with the US, where its common for employees to pay around a quarter of the cost.

Despite the rising costs, many of the companies surveyed expected to maintain their healthcare schemes in order to maintain and attract staff. Around 41 percent of European employers were unlikely to make any changes at all to their programmes, according to the survey.

Concerns of over rising costs were reflected in the fact that 38 percent expected to restrict the scope of coverage, while 34 percent 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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