Wellness Incentives 101

It goes without saying that the success of any company depends largely upon the health and well-being of its workforce. To maintain morale, minimize absenteeism, and improve employee retention rates, organizations need to invest in effective wellness incentives. According to the Kaiser Family Foundation, over 90% of firms with 50 or more employees in 2023 offered some form of health benefits to their workforce.

The Society of Human Resource Management found that the ROI on investing in wellness programs and incentives can reach up to $6 for every dollar spent, primarily due to reduced costs associated with medical claims and employee absenteeism. Considering the potential payoff of wellness programs, it’s no wonder the mental and physical health of workers is rapidly becoming a top priority for many of today’s top companies.

The evolution of wellness programs

While wellness programs have existed in various forms since the early 1800s, it wasn’t until the 1950s that American companies began to offer Employee Assistance Programs (EAPs) to their workers. Originally, these programs were intended to provide workers with supportive resources to help overcome alcoholism. But by the 1980s, the scope of wellness programs quickly began to shift toward physical fitness. By the 1990s, company wellness started to expand into the mental health aspect of employee well-being. In the 2000s, wellness programs and incentives began to gain new momentum as the federal government encouraged their inclusion in workplace-provided healthcare plans. In response, organizations quickly began to recognize the link between wellness incentives and reducing healthcare costs across the board.

Overarching goals of wellness incentives

Encouraging workers to participate in wellness programs by providing various incentives positively affects organizations in several ways. The type of wellness incentives you decide to offer will depend on the prevailing objectives of your company and the unique challenges your workforce faces. Here are some of the primary objectives that wellness incentives aim to accomplish.

Reduce costs

Employee healthcare plans present a major operating expense for organizations. Wellness programs have proven to make a huge difference in lowering costs. According to a Rand study, workforce participation in a disease management program saved companies $136 per person on employer healthcare costs each month. Meanwhile, lifestyle management programs were responsible for $6 in healthcare savings for each member per month. By investing in wellness incentives, your company can significantly reduce healthcare costs related to hospital admissions, absenteeism, and overtime expenses, while also improving employee health and productivity.

Increase productivity

Another goal of wellness incentives is to maximize the efficiency and productivity of a workforce. After all, unhealthy employees tend to use PTO, vacation time, or call off of work more often than their healthy counterparts. According to Gitnux, employees who participate in wellness programs are on average 5% more productive during their workdays. While this may not seem like much, this increased performance across your entire organization can yield substantial results.

Foster a happier work environment

A healthy workforce is far more likely to maintain a positive attitude toward their jobs, which contributes to improved morale across the organization. This can have a profound impact on employee retention and consistently attracting new talent who are seeking a more fulfilling work environment. Wellness programs and incentives send a strong message to employees that your company values the health of every individual. In return, your workers will feel a greater sense of commitment to the job and appreciation for your organization.

Improve employee communication and engagement

When your employees are happy, healthy, and productive, collaboration between various departments will also improve. Thanks to the positive influence of wellness incentives, your workers will feel more engaged with one another, helping to enhance interoffice communication and cooperation. As your employees continue to participate in wellness programs together, they will begin to feel a greater sense of community, increasing the cohesion of your entire workforce.

Legal implications and taxes

It’s important to note that if you’re offering wellness program incentives within your company’s group health plan, you will need to adhere to HIPAA privacy laws. This means that each employee's private health information must be kept confidential and never used in a discriminatory manner. However, wellness program incentives offered outside a group health plan are exempt from HIPAA compliance.

Be aware that wellness incentives that provide some form of monetary reward, either in the form of premium reductions or outright payment, are considered taxable by the IRS. In other words, wellness incentives that are not directly related to receiving medical care must be classified as part of an employee’s income. There are some exceptions to this rule, however, such as small fringe benefits like the occasional movie ticket or free sweatshirt.

Types of wellness program incentives to explore

There are innumerable incentive options to choose from to get your workers involved in your company’s wellness programs. The type of rewards you offer and the frequency at which you distribute prizes to employees will depend on your wellness program budget. Here are a few wellness program incentive ideas to help get you started.

Healthcare contributions

One of the most popular ways to incentivize participation in your wellness program is to offer discounts on company health insurance premiums to those who achieve certain milestones. These milestones may include completing a health assessment, maintaining a healthy BMI for an entire year, or participating in annual biometric screening. For best results, set up an incentive structure that provides an extra lump sum deduction on insurance premiums for those who manage to meet all qualifying wellness benchmarks. Alternatively, you can offer a cash contribution to employee Health Savings Accounts to help cover personal health expenses.

Benefit rewards

Another effective incentive is to provide employees with expanded benefits for participating in your company’s wellness program. Consider offering a few days of PTO or an extra week of vacation time to help motivate workers to achieve certain health goals. Other ideas include offering preferred parking spaces to dedicated wellness program participants or contributing to a tuition reimbursement program in various amounts depending on the milestones achieved.

Reimbursement fund

Ditch rigid wellness programs! Nava Benefits offers the ultimate flexibility with a yearly reimbursement fund dedicated to employee well-being. This empowers your team to prioritize what matters most, giving them the freedom to choose activities that enhance their physical and mental well-being, from running shoes to yoga classes, or anything else that fits their active lifestyle. This means a happier, healthier workforce, and ultimately, a more productive and fulfilled team — a win-win for both employee experience and company success.

Gift bags

You can also provide employees with swag bags for continued participation in your wellness initiatives. For those who meet the minimum wellness requirements, offer a goodie bag with a water bottle, t-shirt, healthy snacks, and a prepaid gift card to a local health or fitness business. Meanwhile, you can award those who go above and beyond with more substantial prizes, such as free enrollment in a mindfulness course or a three-week yoga program.

Tiered cash bonuses

If you really want to get your workforce excited about your wellness program, offering cold, hard cash is one of the most effective methods. Consider awarding tiered annual bonuses to employees who meet certain requirements, such as completing a smoking cessation course, finishing a nutrition education program, or bringing BMI into healthy parameters. Another idea is to open a flexible spending account for employees who continue to meet certain objectives, giving wellness program participants a little extra cash to cover medical, dental, and vision expenses.

Get the expert HR support you need

Implementing attractive wellness incentives at your organization is the single best way to draw more people to your company’s wellness program. Staying up to speed with the latest HR best practices is essential to enhancing the employee experience and fostering a work environment that’s conducive to the growth of your organization. By developing meaningful wellness incentives throughout all levels of your company, you can cultivate a happier, healthier, and more productive workforce from top to bottom. At Nava, we provide expert-level HR advice and strategic support that will help you develop wellness incentives that resonate with your employees. If you’re ready to uplevel employee wellness, join our HR community today to collaborate with other leaders from top companies.