healthscotland.com

Cost and benefit analysis of smoking cessation in the workplace

Contents:	Summary 1. Introduction 2. Review of the literature 3. Survey of Worksites in Scotland 4. Focus groups and interviews with occupational health and personnel staff 5. The cost of employee smoking in Scotland 6. Conclusions and recommendations 7. References Appendices

5. The cost of employee smoking in Scotland

5.2 Employment and earnings in Scotland

This section will attempt to provide estimates of the costs to employers which result from employee smoking. In order to estimate these costs it is firstly necessary to calculate the number of Scottish employees who are smokers and the level of earnings at which to cost the time lost as a result of employee smoking. This requires information on smoking prevalence, employment and earnings as presented in the following sections.

5.2.1 Employment in Scotland

The total number of persons in full-time and part-time employment in Scotland is shown in Table 4.1.

Table 4.1: Employment in Scotland, September 1995

	Male		Female
	Full Time	Part Time	Full Time	Part Time
Employees	895,000	97,000	526,000	431,000
Estimated smokers	297,140	32,204	190,412	143,092

Source: Labour Market Trends, February 1996.

Table 4.1 also shows the estimated number of smokers in employment in Scotland. The prevalence of smoking is applied to the employed population to provide an estimate the total number of Scottish employees who smoke. The prevalence of smoking amongst the employed population of Scotland is estimated at 33.2% for males and 36.2% for females (General Household Survey, 1994).

5.2.2 Earnings

Hourly earnings for the UK are shown in Table 4.2, both as an average wage for the UK and by separate SIC classifications.

Table 4.2: Average earnings in the UK

SIC	Description of SIC	Average Male wage	Average Female wage
SIC 0	Agriculture, forestry and fishing	£5.57	£4.80
SIC 1	Energy and water supply	£10.43	-
SIC 2	Metal manufacturing and chemicals	£7.43	£5.34
SIC 3	Metal goods, engineering and vehicles	£7.02	£4.90
SIC 4	Other manufacturing	£6.91	£4.76
SIC 5	Construction	£6.11	-
SIC 6	Wholesale distribution, hotels and catering	£5.56	£4.17
SIC 7	Transport and communication	£6.36	£5.84
SIC 8	Banking, insurance and finance	£5.79	£5.12
SIC 9	Education, health services and other	£5.96	£4.67
All sectors		£8.86	£7.09

Source: Labour Market Trends, February 1996

5.3 The cost of employee smoking

5.3.1 Absence due to Smoking Related Disease

The costs of employee absence from work are one of the most frequently cited effects of employee smoking. Section 2.2.1 outlines several studies which have attempted to estimate the effects of absence as a result of employee smoking.

Two key studies were found which provided baseline data. The first was based on the Missouri Department of Health (Van Tuinen and Land, 1986) and found an excess absence amongst smokers of one hour a month. An average of 5.3 hours a month sick leave amongst 97 smokers, compared to 4.3 hours amongst 309 non-smokers. The study therefore estimates absence to be 23.2% higher amongst smokers. This result is lower than the estimates for male civil servants in the Whitehall study (46% higher for short absences and 81% higher for long absences), although it is similar to the estimates for female workers (9% and 37% respectively).

The estimates presented below are based on the results of the DuPont study (Bertera, 1991). This study was selected because of its use of a large population (n=45,976) consisting of a diversified workforce. The results were presented as excess days absence per employee which provides the information required to transform the estimates to other scenarios. The DuPont study estimates an excess absence from work amongst smokers of 0.90 days per year (7.2 hours per year), a result which is significant at a 99% confidence level. The estimated excess absence (which translates to 32.2% amongst smokers) is of a similar magnitude to the Van Tuinen and Land and the Bertera studies. The estimated cost of this excess absence for Scottish employers are presented in Table 4.3.

Table 4.3: Estimated cost of absenteeism due to smoking: Scotland 1995

	Smoking employees	Excess sickness absence per annum (hours)	Wage per hour	Cost of absenteeism
Male workers	313,242*	2,255,342	£8.86	£19,982,330
Female workers	261,958*	1,886,098	£7.09	£13,372,435
				£33,354,765

* Part time workers included as half a full time worker

Using the estimates of Bertera et al. (1991), the total cost of employee smoking in terms of excess absenteeism is therefore estimated to be approximately £33 million per annum. This may be interpreted as a ‘low’ estimate of the cost. However, it should be noted that the cost of absenteeism will depend upon a number of factors. Firstly, the estimated excess absence amongst smokers, which will in turn depend upon the study population, and factors such as the level of sickness benefits. If the estimates are drawn from other studies the estimated cost will be different. For example, if the excess absence estimates from the Van Tuinen and Land study are used, the cost to Scottish employers of absenteeism as a result of employee smoking would be £55 million per annum. This may be interpreted as a ‘high’ estimate. Figure 4.1 shows the results of a sensitivity analysis in which the excess absence from work is varied along the x-axis, to show the difference in the cost of smoking related absence from work along the y-axis. The figure shows how the cost to employers increases as the excess absence from work amongst smokers increases.

Figure 4.1. The relationship between the cost of employee smoking and the excess absence from work amongst smokers: sensitivity analysis.

A second factor affecting the estimate is the prevalence of smoking. A lower prevalence should mean that the costs of absence are lower. Figure 4.2 shows the relationship between smoking prevalence and the cost of smoking induced absence from work, using an excess absence of 7.2 hours per annum as estimated by Bertera (1991).

Figure 4.2: Relationship between smoking prevalence and the cost of absence as a result of employee smoking

Thirdly, the wage rate will be an important factor determining the cost of absenteeism. As can be seen from Table 4.3, the estimated costs as a result of smoking by male employees exceed the costs of female employees partly as a result of the higher wages earned by men. The accuracy of this estimate rests upon the assumption that wages reflect the productivity of labour. This assumption is frequently made in economics, but is often violated, for example in cases where labour is supplied by a monopoly supplier (trade union) or hired by a monopsonistic employer. In these cases wages can be maintained artificially above or below the wage rate which would prevail in a free market.

It should be noted that these absenteeism estimates are those which result only from the absence of the individual worker. Bensinger (1985) outlined problems such as the interruption of production schedules, requirement for overtime, the imposition of production quotas on fewer workers and the impaired safety and questionable quality which result when employees are absent from work. Hence, dependent upon the specific scenario, costs may be significantly higher.

5.3.2 Productivity losses due to employee smoking

Productivity losses are highly dependent upon the type of smoking policy which is operated by an employer. A policy permitting smokers to smoke in a designated area at any time is likely to result in the largest productivity losses as smoke breaks can be taken in addition to the breaks allowed to other workers. Productivity losses can be reduced by either requiring that workers ‘clock out’ when they take smoke breaks or restricting the times at which smoking is allowed to the breaks allowed to all workers. However, restrictions on times when smokers can smoke has been found to result in workers smoking secretively in certain areas of the premises, creating a fire risk as proper disposal facilities for matches and cigarette butts are not provided, and also leaving tobacco smoke in the air in toilets and other communal facilities.

The different types of policy identified by the telephone survey are shown in Table 3.4. Following Nelson (1986), a moderate estimate of 5 cigarettes per day at an average of 6 minutes per cigarette represents a time loss of 30 minutes per day due to smoking. These times would appear to be relevant to worksites with a ‘smoke room’ where employees are allowed to smoke at any time of the day. For worksites with no restrictions, Nelson used an estimate of 5 minutes per day representing time spent lighting cigarettes, drawing on the cigarette, flicking the ash and extinguishing the butt.

Table 4.4: Estimated time as a result of employee smoking

	Percentage of firms	Estimated time loss due to smoking (mins)
Smoke room	53.3%	30
Smoke Free Building	34.1%	0
No policy	6.6%	5
Other	6.0%	0

In order to calculate the productivity loss due to smoking, the time spent on smoking is valued at the average wage rate. The estimated cost of the productivity loss to Scottish employers is shown in Tables 4.5 and 4.6. Part time workers are assumed to work for half of the hours worked by full time workers.

Table 4.5: Productivity loss due to employee smoking: Male workers

	Proportion of sites	Employees	Time lost (min)	Wage £	Cost of time £	Total Cost/Day £
Smoke room	0.533	166,958	30	8.86	4.43	739,624
Smoke free	0.341	106,816	0	8.86	0	0
No policy	0.066	20,674	5	8.86	0.73833	15,264
						754,888

Table 4.6: Productivity loss due to employee smoking: Female workers

	Proportion of sites	Employees	Time lost (min)	Wage £	Cost of time £	Total Cost/Day £
Smoke room	0.533	143,069	30	7.09	3.545	507,181
Smoke free	0.341	91,532	0	7.09	0	0
No policy	0.066	17,716	5	7.09	0.59083	10,467
						517,648

By summing the above totals, the total productivity loss is therefore estimated at £1,272,536 per day, or £292,683,406 per annum.

It is possible that productivity losses are also evident at smoke free worksites if employees are permitted to take smoke breaks but have to leave the building. Table 4.7 shows how the cost of smoking which would be affected by different lengths of time spent on smoke breaks in ‘smoke free’ buildings. This however excludes the ‘cost’ of the adverse image created if smokers congregate outside the entrances to the building.

Table 4.7. The costs of employee smoking: Sensitivity to duration of breaks in smoke free buildings

Time spent smoking per smoker per day (mins)

Smoke free building	Smoke room	No policy	Total cost per day
0	30	5	£1,272,536
10	30	5	£1,538,428
20	30	5	£1,804,320
30	30	5	£2,070,211

A plausible assumption, given the absence of accurate data, may be that smokers can take unrestricted smoke breaks in 50% of smoke free buildings and 50% of buildings with smoke rooms, and that smoke breaks in these workplaces last for 30 minutes. Table 4.8 shows the cost of productivity losses with these assumptions.

Table 4.8 Productivity costs per day, assuming 50% of employees in smoke free buildings and premises with smoke rooms can take unrestricted smoke breaks

Male

Female

Productivity cost in premises with smoke room	£369,812	£253,591
Productivity cost in smoke free buildings	£236,596	£162,241

Assuming employees work 46 weeks year, of 5 days a week, the costs in Table 4.8 translate to an annual productivity loss of £235,115,200.

5.3.3 Fire damage to business premises

Fire damage to business premises as a result of employee smoking is another cost which must be taken into consideration. Although firms are often insured against fire damage, ultimately businesses will share the cost through higher insurance premiums.

However, discounts for firms with no-smoking policies were not available at several insurance companies contacted, indicating that employee smoking is not considered to be a significant risk factor.

The total insurance claims for fire damage to commercial premises in the UK for 1993 was £425,000,000 (Association of British Insurers, 1995). Allocated in proportion to the number of non-residential premises in Scotland this gives £46,854,870. Using the estimates of Nelson (1986), the proportions attributable to smokers materials (cigarettes and ash) for the UK is 9.5%, matches 8.7% and unknowns 4.6%. These proportions may also be used to estimate the proportions of unknowns attributable to smokers materials and matches. The estimated cost of fire damage attributable to smoking is shown in Table 4.9. The cost of fire damage to business premises in Scotland would therefore be £80,750,000. Inflated to 1995 prices this becomes £85,749,232.

Table 4.9: Cost of fire damage attributable to smoking: Scotland, 1993.

Source of ignition	Proportion attributable †	Total cost of fire damage (1993)
Smokers materials §	0.095	£40,375,000
Matches	0.087	£36,975,000
Unknowns- Smokers materials*	0.004	£1,700,000
- Matches*	0.004	£1,700,000
		£80,750,000

* Unknowns are allocated to smokers’ materials and matches according to the proportion of other fires resulting from these sources.

§ Smokers materials = Cigarettes, discarded cigarette butts, ash, cigars etc.

† Source of attributable risks: Nelson (1986)

5.3.4 Deaths due to smoking

Employee deaths and retirements due to smoking related diseases also impose costs on employers. The cost will depend upon several factors such as how easily the labour can be replaced and the prevailing level of unemployment. In an economy with a high level of unemployment, costs will tend to be lower since there is a pool of replacement labour available. However, for specialist labour in short supply the costs to an employer may be significant. This would be the case for example if an employer employed labour which needed a lengthy training period. Hence the costs are very specific to each particular scenario.

5.3.5 Other costs

In addition to the above costs of employee smoking, there are numerous other costs which must be taken into account. This category will include clean-up costs, redecoration costs, and potential damage to equipment such as computers and buildings, walls and floor coverings. These costs are specific to each particular employment situation and are extremely difficult to generalise.

5.4 Simulations

The cost of employee smoking to an employer will depend on several variables, such as the type of smoking policy in operation, the prevalence of smoking amongst employees and whether employees are allowed to take smoke breaks in addition to other breaks.

Table 4.10 provides a summary of how the costs of employee smoking may be estimated. Firstly, the number of male and female smokers should be calculated, either by direct observation or by applying prevalence rates to the workforce as a whole. The time spent by each smoker taking smoke breaks should then be estimated. If smoking is permitted in the workplace this time will be the time spent by employees lighting, drawing on, extinguishing and disposing of cigarettes. If there is a smoke room facility then this will include time spent taking breaks. The time per person should then be multiplied by the number of smokers to give a total time spent smoking per day. The time in hours is multiplied by the average wage rate to give an estimate of the cost of this time.

An estimate of the excess absence from work can be derived by multiplying the number of smokers by the estimated excess absence from work. The cost of absence from work can then be derived by multiplying the wage rate by the total excess hours absent from work. An example is shown in Section 4.5. Insurance costs do not enter the equation for a single firm, as premiums will only be reduced if there is a reduction in the prevalence of smoking across all employers and therefore claims as a result of fire damage are reduced.

Table 4.10: Estimating the cost of productivity losses and absence from work

1. Determine/estimate the number of male and female smokers in the firm. 2. Calculate the hours spent taking smoke breaks or lighting and smoking cigarettes for male and female workers that smoke. 3. Multiply the total number of hours for male and female workers by the relevant wage rates to estimate the cost of productivity losses. 4. Calculate the total time absent from work as a result of smoking induced disease for male and female workers that smoke. 5. Multiply the number of hours by the relevant wage rates for males and females to give the cost of absence. 6. Adding together the totals (3+5) provides an estimate of the cost of employee smoking to the firm in terms of productivity losses and absence costs.

An estimate of the net benefits to the employer of a smoking cessation programme can be made by following the methodology summarised in Table 4.11. The method estimates the costs of productivity losses and absence losses as in Table 4.10, then multiplies the total cost by the success rate of the policy to derive the benefits of the programme. The net benefits of a smoking cessation programme are estimated by deducting the cost of the programme from the cost of the time saved and the reductions in absence from work that are achieved. However, it must be emphasised that all benefits are not immediately realised (see Section 1.4.1) and there may be a considerable time lag of several years before reductions in absence from work are achieved. Furthermore, the benefits will be dependent upon the staff turnover rates as a stream of benefits will only be realised if staff remain in employment with the firm.

Table 4.11: Estimating the net benefits of a smoking cessation programme

1. Determine / Estimate the number of male and female smokers in the firm. 2. Calculate the hours spent taking smoke breaks or lighting and smoking cigarettes for male and female workers that smoke. 3. Multiply the number of hours by the wage rate. 4. Calculate the total time absent from work as a result of smoking induced disease for male and female workers that smoke. 5. Multiply the number of hours by the wage rate. 6. Add together the totals (3+5). 7. Multiply this total by the success rate of the policy. 8. Deduct from this total the cost of the programme to give an estimate of the net benefits to the employer of the programme.

5.5 Example of the costs and benefits to an employer

This section provides an example of how the net benefits of a smoking cessation programme may be estimated. Consider a hypothetical firm with 200 employees of which half are male. Applying the prevalence figures from the General Household Survey (1994) 33 of the male workers and 36 of the female workers would therefore be expected to smoke (see Section 4.2.1). Suppose that the firm has a smoke room where employees are allowed to smoke for 15 minutes morning and afternoon in addition to normal breaks taken by all workers. Costing the lost time at the average wage rate, the productivity loss from male workers smoking is therefore estimated to be £33,624 per annum and for female workers £29,353 per annum.

Using the estimated excess absence of 0.9 days per year (7.2 hours) amongst smokers (Bertera 1991) the firm would expect the 33 male smokers to take an annual additional 237.6 hours absence at a cost of £2,105 and the 36 female smokers to take 259.2 hours costing £1,838.

A worksite smoking cessation programme is introduced, with a success rate of 25% (Katz et al, 1990). There would now be 25 male and 27 female smokers in the firm. During the next year the firm would experience cost savings in terms of male absence of £526 and female absence £459. A productivity gain of £8,406 would also be expected for male workers and £7,338 for female workers. The total gains for the first year are therefore estimated to be £16,730 in terms of reductions in productivity losses and absenteeism. This suggests that if the policy costs less than £16,730 then the employer may expect positive cost savings to in year one. However, it should be noted that these gains in the first year after cessation are not certain and there is often a time lag before gains are achieved once a smoker has stopped smoking. It should also be noted that these calculations will vary according to assumptions about the employer in question, such as the length of smoke breaks, the provisions for smokers and the relationship between the wage level and productivity. In addition, the estimates of absence from work amongst smokers will affect the savings when a cessation programme is introduced.

Tables 4.12 - 4.14 summarise the results from three simulations of the cost of employee smoking and benefits of a cessation programme. The calculations behind the results are provided in Appendix 2. The attached disk provides Microsoft Excel files that can produce estimates of the cost of employee smoking and the benefits of a cessation programme for any rates of smoking prevalence, programme success rate, wage level, employed population, excess sickness absence amongst smokers and duration of smoke breaks.

Table 4.12. Simulation 1. SIC4 company: No smoking allowed, no smoke breaks

SIC 4 Manufacturing

Employees:	Male: 250	Female: 150

	Time spent smoking per person per day	0
	Estimated productivity loss	0
	Estimated cost of absence	£5,955.23
	Cessation policy success rate	25%
	Estimated savings to employer	£1,488.81

Table 4.13. Simulation 2. SIC3 company: No restrictions on smoking

SIC 3 Metal goods engineering and vehicles

Employees:	Male: 250	Female: 150

	Time spent smoking per person per day	5 mins
	Estimated productivity loss	£16,171.88
	Estimated cost of absence	£6,075.00
	Cessation policy success rate	25%
	Estimated savings to employer	£5,561.72

Table 4.14. Simulation 3. SIC9: Smoke room, smokers can take un-restricted breaks

SIC 9 Education, health services and others

Employees:	Male: 500	Female: 500

	Time spent smoking per person per day	50 mins
	Estimated productivity loss	£349,600.00
	Estimated cost of absence	£13,132.80
	Cessation policy success rate	25%
	Estimated savings to employer	£90,683.20

The above examples show the kind of simulations that can be produced by changing the key variables. This is, however, a simplistic model which cannot take into account all of the variables which may affect the cost of employee smoking. A diagrammatic representation of these issues is presented in Appendix 4. The diagram shows how the costs and benefits will be affected by different types of policy and the specific aspects of the policy. An important point to note is that if employees are permitted to smoke in a restricted area then it should be determined whether there are restrictions on the amount of time that workers can take smoke breaks (as seen in the lower section of the diagram). If time is not strictly limited then information on the number of breaks taken and distance to the smoking facility is needed. These costs will be a function of building size and the number of areas in which smoking is permitted. Workplace specific variables may also result from the activities of the firm, for example in certain workplaces, safety regulations may mean that smokers can only smoke away from certain industrial materials. Therefore, in order to make accurate estimates of the cost of employee smoking, it is necessary to obtain precise workplace data.

5.6 Conclusions

The costs imposed on employers by employees who smoke are significant. The above estimates show that the annual cost of employee smoking in Scotland may be in the region of £293 million as a result of lost productivity, £33 million from higher rates of absenteeism among smokers and £81 million as a result of fire damage. However, this estimate of the productivity loss is highly dependent on the assumptions made. Using a different set of assumptions, namely that 50% of smoke free buildings and 50% of premises with a smoke room to allow unlimited smoke breaks, the estimated productivity loss is an annual £235 million. It should also be noted that the cost of absenteeism is highly dependent upon the estimate of excess absence from work by smokers. These cost estimates also exclude other possible costs such as cleaning, redecoration and repairs to machinery. Furthermore, employers may face legal costs if they are found guilty of failing to protect non-smokers at work.

Estimating the costs which smokers impose on their employers is dependent upon many specific details of the actual employment scenario. The actual costs will depend upon many variables such as the type of labour employed and how easily labour is replaced, whether smoke breaks are permitted or not, how many cigarettes employees smoke (heavy versus light smokers) and the physical characteristics of the working environment.

However, from the estimates presented it should be noted that employees who smoke do impose considerable costs on their employers. Cessation programmes to assist smokers to stop smoking do offer a significant potential for cost savings in the workplace.

5.1 Introduction

Knowledge of the cost of smoking in a particular workplace could be useful in helping promote interest in workplace smoking policies. Such figures may also provide a starting point for a fuller evaluation of the introduction of smoking cessation programmes as a part of workplace policies. The aim of this section is to provide a template which can be applied to different types of workplaces in Scotland.

The estimates are divided into the major cost categories outlined above and are based on published data sources (see Section 2), previous studies and the results of the survey of Scottish employers (see Section 3).