The cost of providing employee healthcare rose by 5% in 2007.

According to Mercer, on average 5.3% of a UK company's total payroll costs go towards health benefits for staff compared with 15% for US companies

In 2007, 51% of employers reported an increase in these costs stating that "retaining key talent" was the rationale behind providing healthcare to staff.

Despite the increase, 41% of employers said they were unlikely to make changes to their current programmes to contain cost increases but 34% said they would shift the cost to employees.

Steve Clements, principal at Mercer, said: "Company directors are aware of the increasing costs of medical provision. They are trying to maintain a balance between the increasing costs and the belief that this benefit not only attracts good staff but also provides a return on investment over the longer term. A healthy workforce is, after all, a more productive workforce."