Terms of Reference

In accordance with the instructions of Vice President- Operations, I am humbled to present

this report on the necessity of retaining the fitness center at the office premises of
headquarters of Rocky Mountain Mutual (RMM).

Procedure

This report was compiled by analyzing following data & behavioral characteristics:

• Medical costs of previous 2 years of employees of RMM

• Absenteeism rate of employees

• Rate of usage of fitness center

• Observed behavioral changes in employees & their work pattern

• Overhead costs like recruitment cost, training cost and amount lost due to possible
high employee exits etc.

Criteria & Evaluation

 Impact of fitness center on employee healthcare costs & absenteeism:

As per observed medical costs of employees of last 2 years, following trend was found:

Medical cost (individual,

Frequency of usage % of Employees Total cost ($)
$)

1-2/week 25 300 18750

3 or more /week 10 100 2500
None 65 500 81250
Total 102500

In accordance with current usage rate of fitness center as shown in above table, it was found
that the company is incurring a total sum of $1,02,500/- as medical costs annually for its 250
employees.

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As per absenteeism rate data, users missed on an avg. 6 days/year while non-users missed on
an avg. 12 days/year:

Rate of absenteeism Total Man-days

Category Users as % of employees
(days/year) missed

Users 6 35 525
Non users 12 65 1950

Using the absenteeism rate, total man-days missed was also calculated & it was linked with
what value addition it could have done on company’s operational figures like daily revenue,
profit, cost optimization etc. if the total man-days missed was a low figure.

 Employee morale & productivity: Users of fitness centers were found to be more
energetic & motivated for work than non-users.
 Increased user base through wellness programs and promotional activities to motivate
the employees.
 Employee retention in accordance with expansion plans of the company: Non-
availability of sports clubs or fitness centers in nearby areas of office complex made
the remote area very unpopular to work at, especially amongst the young employees.
The presence of fitness center also served as a tool in retaining them.
 Costs incurred by company on employee training programs: If attrition rate increases
then more costs will have to be incurred by the company on employee on-boarding &
training.
 Company brand value: Re-creation facilities offered by company create a positive
impact on current & prospective employees. Current employees will percolate the
brand name & the facilities offered by the company amongst their family, friends etc.
which will also encourage people in other companies or youngsters straight out of
college to make a career in Rocky Mountain Mutual.

Conclusion

The Fitness center should not be closed down because:

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  As the user base increases, it would lead to reduction in medical expenses of
employees. The amount thus saved on medical costs can be used to cover some
operational cost of running the fitness center. (Operational cost- $1,00,000)

 People who visited Fitness center regularly showed less absenteeism, thus leading to
lesser loss of man-days.

 Improved employee morale led to increased productivity.

 Major feature offered by the organization to attract and retain young employees

 Unavailability of any such facility in the vicinity made it a striking feature for the
company & provided an advantage over its competitors.

 Wellness programs should be promoted to increase the employee engagement. A

wellness program was run in claims department to encourage employees to use fitness
center & it was found that after consistently using the fitness center, productivity of
employees increased by 18% & absenteeism came down by 5%. Similar programs can
be run in other departments also so that more & more employees use the facility.

Frequency of usage % of Employees Medical cost (individual, $) Total cost

1-2/week 50 300 37500

3 or more /week 20 100 5000
None 30 500 37500
Total 80000
Savings 22500

Frequency of Medical cost (individual,

usage % of Employees $) Total cost

1-2/week 60 300 45000

3 or more /week 30 100 7500

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 None 10 500 12500
Total 65000
Savings 37500

Recommendation

The fitness centre should not be closed down and promotional activities should be carried out
to motivate people to be health conscious and use the centre for their benefit.

Signed:

Claims Manager

Date: 27th October 2021

References

https://www.bls.gov/eag/eag.ut.htm

https://www.who.int/news-room/fact-sheets/detail/physical-activity

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