Estimating the cost of a smoking employee

Abstract

Objective We attempted to estimate the excess annual costs that a US private employer may attribute to employing an individual who smokes tobacco as compared to a non-smoking employee.
Design Reviewing and synthesising previous literature estimating certain discrete costs associated with smoking employees, we developed a cost estimation approach that approximates the total of such costs for US employers. We examined absenteeism, presenteesim, smoking breaks, healthcare costs and pension benefits for smokers.
Results Our best estimate of the annual excess cost to employ a smoker is $5816. This estimate should be taken as a general indicator of the extent of excess costs, not as a predictive point value.
Conclusions Employees who smoke impose significant excess costs on private employers. The results of this study may help inform employer decisions about tobacco-related policies.

Full text

Estimating the cost of a smoking employee
Micah Berman,
1
Rob Crane,
2
Eric Seiber,
3
Mehmet Munur
4
1
The Ohio State University,
College of Public Health &
Moritz College of Law,
Columbus, Ohio, USA
2
College of Medicine, The Ohio
State University, Columbus,
Ohio, USA
3
College of Public Health,
The Ohio State University,
Columbus, Ohio, USA
4
Tsibouris & Associates LLC,
Columbus, Ohio, USA
Correspondence to
Micah Berman,
College of Public Health &
Moritz College of Law, The
Ohio State University, Cunz
Hall, 1841 Neil Ave.,
Columbus, OH 43210, USA;
mberman@cph.osu.edu
Received 15 November 2012
Accepted 25 April 2013
Published Online First
4 June 2013
To cite: Berman M,
Crane R, Seiber E, et al.Tob
Control 2014;23:428–433.
ABSTRACT
Objective We attempted to estimate the excess annual
costs that a US private employer may attribute to
employing an individual who smokes tobacco as
compared to a non-smoking employee.
Design Reviewing and synthesising previous literature
estimating certain discrete costs associated with smoking
employees, we developed a cost estimation approach
that approximates the total of such costs for US
employers. We examined absenteeism, presenteesim,
smoking breaks, healthcare costs and pension benefits
for smokers.
Results Our best estimate of the annual excess cost to
employ a smoker is $5816. This estimate should be
taken as a general indicator of the extent of excess
costs, not as a predictive point value.
Conclusions Employees who smoke impose significant
excess costs on private employers. The results of this
study may help inform employer decisions about
tobacco-related policies.
ESTIMATING THE COST OF A SMOKING
EMPLOYEE
Smoking by employees costs businesses money. But
just how much? Previous studies provide only very
rough (and often inaccurate) estimates of the excess
costs imposed by employees’smoking. For
example, the Centers for Disease Control (CDC)
estimates that smoking-attributable productivity
losses and medical expenditures amount to
approximately $3400 per year for each adult
smoker.
1
The CDC’s report, however, looks only at
the overall economy; its calculations of productivity
losses and medical expenditures do not distinguish
between costs borne by employers and those
absorbed by others (the smokers themselves, insur-
ance companies, taxpayers, etc.). Moreover, the
CDC’s study looks only at mortality-related prod-
uctivity losses, that is, lost productivity caused by
premature smoking-related deaths. Although
smoking-attributable deaths surely reduce economic
productivity in a general sense, the lost earning
potential due to premature death is not an accurate
reflection of an employer’scosts. The CDC’sfigure
thus provides a poor estimate for employers to use
in gauging their own costs.
This paper estimates the average excess cost of a
smoking employee (over a non-smoking employee)
from a private employer’s perspective. Such an esti-
mate can provide important factual context to
employer decisions about tobacco-related policies.
Numerous employers have begun charging smokers
higher premiums for health insurance,
2
and several
large employers including Turner Broadcasting,
Alaska Airlines, Union Pacific Railroad and a number
of large hospital systems have decided to hire non-
smokers only.
34
Other companies, such as
Ohio-based Scotts Miracle-Gro and Michigan-based
Weyco, Inc, have gone a step further and decided that
they will no longer retain employees who do not quit
smoking within a given period of time.
5
With o u t a n
accurate estimate of smoking-related costs, such pol-
icies may seem arbitrary or unreasonable. A
well-reasoned estimate allows companies to more
fairly analyse the costs and benefits of such ‘tobacco-
free workforce’policies.
METHODOLOGY
Javitz et al
6
conducted what appears to be the most
exhaustive review of the various costs that smoking
employees impose on their employers. That review
does not, however, estimate an overall sum of these
costs. Chris Hallamore calculated such a sum for
the Conference Board of Canada, but the
Conference Board report is written for Canadian
employers (who do not pay any healthcare costs)
and ignores some of the other employer costs (such
as ‘presenteeism’) discussed by Javitz.
7
Building
upon these analyses and a review of other pub-
lished research, this paper constructs a cost estima-
tion approach for the excess costs incurred by a
private-sector US employer for each employee who
smokes. It considers excess absenteeism, presentee-
ism, lost productivity due to smoking breaks,
excess healthcare costs and pension benefits.
Our analysis omits several other costs that
employers may face as a result of hiring employees
who smoke, such as higher workers’compensation
costs and higher life and fire insurance premiums.
We did not include these costs because they vary
widely by industry and recent studies do not
present reliable cost estimates. For example,
although Musich et al
8
showed that workers’com-
pensation costs were dramatically higher for
smokers than for non-smokers among Xerox’s
employees, Boyce et al
9
found no statistically sig-
nificant difference in workers’compensation claims
between smoking and non-smoking police officers
in Charlotte, North Carolina. In addition, we
excluded facilities-related costs such as the cost of
maintaining ‘smoking huts’or installing ventilation
systems. These costs are largely within the control
of the employer, unlike the other major costs dis-
cussed in this paper, and they can be reduced or
eliminated by employer policies (or state or local
laws) requiring a smoke-free workplace. Our
approach may underestimate the relevant costs as a
result of omitting these considerations and others.
Table 1 summarises the findings of this paper.
For each category of expense, we present our best
estimate of an employer’s costs, followed by a high
range and a low range. As discussed in each subse-
quent section, we arrived at our estimates by sur-
veying existing research and applying the high and
low ranges of that research, as well as what we
428 Berman M, et al.Tob Control 2014;23:428–433. doi:10.1136/tobaccocontrol-2012-050888
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considered to be ‘best estimate’(either the average of previous
research or a more conservative estimate). Where necessary, we
then used standard government statistics to convert the findings
of previous research into a per-employee cost. In some cases,
this required an adjustment for inflation. All costs have been
adjusted to 2010 levels using the U.S. Bureau of Labor Statistics’
Consumer Price Index (CPI) inflation calculator. Because
smokers are, on average, paid less than non-smokers, we have
adjusted the average wage level used in our calculations.
Following the findings of the Medical Expenditure Panel Survey,
as reported by Cowan and Schwab,
10
we have discounted the
average hourly wage reported by the U.S. Bureau of Labor
Statistics by 15.6%.
Given our need to standardise and combine a range of studies
that employed different methodologies, the results should be
not taken as predictive point estimates. Rather, we believe our
paper accurately shows the general range of costs that private
employers who hire employees who smoke may bear. As dis-
cussed below, individual employers may adjust the calculations
used in our cost estimation approach in order to better estimate
their own costs.
LOST PRODUCTIVITY DUE TO EXCESS ABSENTEEISM
Prior studies calculating workplace absenteeism due to smoking
have come to surprisingly similar results. Some of these studies,
while finding that smoking led to excess absenteeism, did not
translate that finding into an average number of absences per year.
For example, Robbins et al examined the records of nearly 90 000
U.S. Army personnel and concluded that ‘current smoking was
associated with a 60% increase in risk of lost workdays among
men and a 15% increase in risk among women’.
11 12
The recent
US studies that did compute average excess annual absences by
smokers are summarised in table 2.
There are also a number of non-US studies that have looked at
workplace absenteeism caused by smoking. These studies are not
directly applicable to the US context, but are instructive nonethe-
less. These studies have all found an association between smoking
and absenteeism, but have varied more widely in their calculation
of the average number of excess absences. The variation appears to
be due to national and cultural differences with regard to work-
place absenteeism in general. For example, a study in Taiwan by
Ts a i et al
13
found that male smokers took off an average of
4.36 days, while male non-smokers missed only 3.3 days. Female
smokers took off 4.96 days, while non-smoking women were
absent 3.75 days. Thus, Tsai found an average of 1.03 excess days
of absenteeism for male smokers and 1.21 days for female
smokers. Taiwan, however, has extremely low rates of absenteeism,
compared to the international average.
13
On the other end of the
spectrum, Lundborg
14
looked at Swedish employees and found
that smokers were absent 10.7 days more than never smokers.
After controlling for health status and other risk factors, Lundborg
concluded that smoking accounted for 7.7 days of excess absence
per year. These results matched earlier studies in Sweden that
found 7.6 days of excess absence for smokers.
15
Sweden, however,
has the highest rate of absences in the Organisation for Economic
Co-operation and Development countries, with an average of 25
absences per year, compared to nine in the USA.
14
We compute the cost of excess absenteeism by taking the
number of days of excess absenteeism for current smokers and
multiplying by the number of hours worked during the day
(7.5)
15
and the average wage and benefits paid to the employee
($26.49). As noted above, the average wage is discounted by
15.6% to account for the lower average pay of current smokers
(benefits are not discounted).
10
According to the Employee
Benefit Research Institute, the average for wages and benefits
paid by employers in 2010 was $29.72.
16
The wage portion of
that amount, $20.71, is discounted by 15.6% to reach an
average wage for an employee who smokes of $17.48. Including
benefits, the average hourly amount paid to an employee who
smokes is estimated to be $26.49. Using the lowest calculation
of smoking-related absences in the USA—0.9 excess days in a
dated 1991 study
17
—the average cost would be $178.81. At the
high end of the range, using the 2.9 days of excess absence cal-
culated by Tsai et al in their US study,
18
the average cost would
be $576.16. In between those extremes, using an estimate of
2.6 days (the average of the recent US studies and slightly less
than the estimate of excess absenteeism produced by a recent
meta-analysis of US and international absenteeism studies
19
)
would result in an average annual per-smoker cost of $516.56
(box 1).
Table 2 Estimates of annual excess absences
Author Sample
Annual excess absences
(smokers compared to never
smokers)
Halpern
et al
22
300 airline reservation agents 2.6 (2 year average)
Tsai
et al
18
2203 Shell Oil Company
employees
2.9
Bunn
et al
23
45 630 employees at 147
companies (voluntary
self-reporting)
2.3
Box 1 Lost productivity due to excess absenteeism
▸Cost
AbsentSmokers
=Days Lost
Smokers
×Hours
Worked×Compensation Cost=$516.56.
▸Cost
AbsentSmokers
=Total annual per-employee cost due to
increased absenteeism in smoking employees.
▸Days Lost
Smokers
=Number of additional days of absenteeism
taken by an average smoking employee compared to an
average nonsmoking employee (2.6 days—the average of
recent US studies).
▸Hours Worked=Number of hours worked in a day (7.5).
▸Compensation Cost=Average hourly wage and benefits paid
to an employee who is a current smoker ($26.49).
Table 1 Total annual excess cost of a smoking employee to a
private employer
Category
Best estimate annual
costs
High
range
Low
range
Excess absenteeism $517 $576 $179
Presenteeism 462 1848 462
Smoking breaks 3077 4103 1641
Excess healthcare
costs
2056 3598 899
Pension benefit (296)* 0 (296)*
Total costs $5816 $10125 $2885
*For employers with defined-benefit pension plans.
Berman M, et al.Tob Control 2014;23:428–433. doi:10.1136/tobaccocontrol-2012-050888 429
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LOST PRODUCTIVITY DUE TO PRESENTEEISM
Another cost to employers from smoking employees is ‘present-
eeism’—lower on-the-job productivity that results from nicotine
addiction. Though all employees are occasionally unproductive
in one way or another, research suggests that smoking status
negatively impacts productivity separately and apart from lost
work time due to smoking breaks and absenteeism. This is
because nicotine is a powerfully addictive drug. Although cigar-
ettes satisfy a smoker’s need for nicotine, the effect wears off
quickly. Within 30 min after finishing the last inhalation, the
smoker may already be beginning to feel symptoms of both
physical and psychological withdrawal.
20
(Much of what
smokers perceive as the relaxing and clarifying effect of nicotine
is actually relief from their acute withdrawal symptoms.) Now
that the vast majority of workplaces are smoke-free, the repeti-
tive, prolonged withdrawals that smoking employees suffer pre-
dictably diminishes their productivity at work.
Accurately measuring lost productivity due to presenteeism,
however, is difficult. As Mattke et al
21
write, ‘Conducting such
research is by no means a straightforward task, particularly in
knowledge-based occupations’. Even when objective measures
are used to compare the productivity of smokers and non-
smokers, monetising the cost to the employer—especially in a
way that would be relevant to different firms or different profes-
sions—remains problematic.
22
But although the specific amount
of lost productivity remains difficult to determine, studies have
consistently demonstrated that employees who smoke are less
productive than employees who do not.
22
Studies that have tried to quantify smoking-related presentee-
ism have, despite the imprecision of the evaluation tools,
reached similar results. Bunn et al
23
reviewed more than 10 000
employee records from 147 US employers. They found that
mean hours of lost productivity per year due to presenteeism
were 76.5 h for a smoker compared with 42.8 h for a never
smoker.
23
The excess presenteeism of 33.7 h/year equals
approximately 1.9% of hours worked per year. Burton et al
looked at a cohort of employees at a Midwestern financial ser-
vices company and evaluated self-reported indicators of prod-
uctivity. They concluded that smoking was associated with a
2.8% reduction in productivity.
24
Other estimates of lost prod-
uctivity due to presenteeism range up to 4%.
25
We compute the annual cost of smoker-related presenteeism by
taking the percentage of lost productivity for current smokers and
multiplying it by the cost of compensation per hour, hours worked
per day and days worked per year. Estimates of smoker-related lost
productivity range up to 4%, which would result in an annual
per-smoker excess cost of $1847.68. Averaging the results of the
Bunn and Burton studies would result in an estimated
smoking-related productivity loss of more than 2%. Nonetheless,
due to the difficulties in measuring presenteeism, the possibility
that employees may compensate for lost productivity, and the
potential for employers to adjust for such costs (eg, by paying
lower wages to less productive employees), we use a very conserva-
tive estimate of 1% for the productivity loss due to presenteeism.
This results in an average annual cost of $461.92 (box 2).
LOST PRODUCTIVITY DUE TO SMOKING BREAKS
Productivity loss due to smoking breaks is by far the largest
single cost that a private employer incurs from a smoking
employee. Fortunately, it is a cost that can be completely elimi-
nated by smoking cessation (unlike healthcare costs and absen-
teeism, for which former smokers will still have higher average
costs than never smokers).
Previous studies have found that the amount of time lost to
unsanctioned smoking breaks ranges from 8 to 30 min/day.
6
This number may vary substantially depending upon firm policy.
As Javitz et al
6
state, ‘the number of lost minutes to the
employer depends on the amount of flexibility that employees
have concerning when they may smoke and when they may take
their breaks’.
The Conference Board of Canada report estimated that
employees smoke a majority of their daily cigarettes outside of
work, with an average of five cigarettes consumed in an 8-h
workday—three of those during sanctioned breaks.
7
This esti-
mate is supported by studies focusing on smoking breaks that
were conducted in Canada.
26
Since the number of cigarettes
consumed per smoker in Canada (15.2)
26
and the USA (16.8)
27
is similar, the assumption that only two cigarettes are smoked in
non-employer sanctioned times may be applied to the USA as
well. Though the average amount of time spent by employees
on smoking breaks is debatable (the Conference Board estimated
20 min), 15 min/cigarette break is a conservative estimate that
matches employer estimates of time lost to smoking breaks.
6
As
more and more US companies adopt smoke-free campus pol-
icies, requiring employees to leave the company’s property in
order to smoke, the amount of time taken to consume each cig-
arette may increase.
We calculate the annual cost of lost productivity due to
smoking breaks by taking the number of cigarettes consumed
per day outside of employer sanctioned times, multiplying it by
the amount of time it takes to consume each cigarette (adjusted
as a fraction of an hour), the cost of the compensation per
hour,
16
and the number of days worked. Assuming that only
two cigarettes are smoked outside of sanctioned break times
each day, and that it takes 15 min to smoke each cigarette, the
annual per-smoker cost of lost productivity due to unsanctioned
smoking breaks is $3077.24. Using an estimate of 20 min/day, as
estimated by the Conference Board of Canada, would result in a
per-smoker cost of $4102.85. Utilising the lowest available esti-
mate of 8 min/day
7
would result in an annual cost of $1641.14
(box 3).
EXCESS HEALTHCARE COSTS
Smoking by employees, whether on or off the job, also leads to
excess healthcare expenses. Estimating an average excess cost
per smoking employee, however, is complex. Even assuming
that an employer knows the smoking status of its employees, it
is no simple task to estimate the increased costs that are attribut-
able to smoking. The higher healthcare costs of smoking
employees may be in part the result of other coexisting risk
factors such as a poor diet, lack of exercise, or abuse of alcohol.
Box 2 Lost productivity due to presenteeism
▸Cost
Prod
=Excess Presenteeism Rate×Compensation
Cost×Hours Worked×Days Worked=$461.92.
▸Cost
Prod
=Annual per-employee cost due to loss of
productivity.
▸Excess Presenteeism Rate (1%).
▸Hours Worked: Number of hours worked during the day
(7.5).
▸Compensation Cost: Average hourly wage and benefits paid
to an employee who is a current smoker ($26.49).
▸Days Worked: Number of days worked per year (232.5).
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In addition, many employees pay a substantial portion of their
health insurance premium; although uncommon, employers
may be able to reduce their share of excess smoking-related
costs by requiring smoking employees (and dependents) to pay
higher healthcare premiums.
Employer costs may vary depending upon whether the
employer is self-insured or purchases private insurance. For
employers who purchase private insurance, their responsibility
for healthcare expenses ends when their share of health insur-
ance premiums is paid. At that point, smoking-related illnesses
do not produce an increase in healthcare costs for the employer.
Nonetheless, an employer with no smoking employees could
presumably obtain a discount in insurance premiums, due to the
fact that the employee pool is likely to have lower overall
healthcare costs. Correspondingly, health insurance premiums
are higher for employers when there are more smokers in the
labour force. However, there is no available data with which to
measure the amount of excess premium costs on a per-smoker
basis.
Our cost estimation approach therefore addresses only the
excess healthcare costs of smoking employees for employers
who self-insure. These businesses, which bear their own health-
care costs more directly, employ about 55% of private employ-
ees.
16
Although our approach may not produce as accurate an
estimate if the employer is not self-insured, usually an employ-
er’s claims experience will eventually be reflected in that
employer’s health insurance premiums.
There are many studies focusing on the overall healthcare
costs caused by smoking, although, as noted above, employers
do not bear all of these costs. Warner et al
28
surveyed studies
that estimated overall smoking-attributable healthcare expendi-
tures. Their survey showed that estimates of the healthcare costs
due to smoking ranged from 3.5% to 14% of all healthcare
spendings.
29
Though the average conclusion of previous studies
was that 6–8% of healthcare costs were due to smoking-related
diseases, Warner et al
28
expressed their opinion that the correct
percentage was likely higher.
More recent studies have produced somewhat higher esti-
mates of the smoking-attributable fraction (SA%) of healthcare
costs, due in part to the fact that these studies correct for some
of the deficiencies noted by Warner et al. For example, Max
et al studied the healthcare cost of smoking in California, which
totalled approximately $8.6 billion in 1999 (or $1798.74 per
smoker).
12
They concluded that smoking-related costs
accounted for 11.4% of all healthcare costs for men and 8% of
all healthcare costs for women. It should be noted, however,
that smoking prevalence in California was (and is) lower than
the national average. Other studies have estimated
smoking-attributable costs to be significantly higher.
29 30
We compute the annual cost ( per smoking employee) of
excess healthcare to a private employer by multiplying the total
cost of healthcare to private employers
31
by the SA% and then
dividing this total by the number of private employees who
smoke in the workforce.
32 33
Using an SA% of 8%, this results
in a total of $2056. At the high end of scale, using a SA% of
14% results in a per-smoker cost of $3598, while the lowest
estimate of 3.5% results in $899. Since most studies of the SA%
cluster around 6–8% and older studies have tended to systemat-
ically underestimate the SA%, we believe that 8% is an appro-
priate figure to use (box 4).
‘DEATH BENEFIT’
Some have argued that although smokers require higher average
healthcare costs while alive, they incur fewer costs overall due
to their shorter lifespan.
34
Though Philip Morris has played a
role in popularising this theory, it turns out to be false.
Rasmussen et al
35
confirmed that even though never smokers
lived longer than current smokers, their lifetime direct and
indirect healthcare costs were lower. In a separate study, they
confirmed that quitting smoking leads to substantial savings in
terms of both healthcare costs and overall economic
productivity.
36
The more pertinent question for this analysis is whether
smokers’shorter life spans end up providing employers with a
‘death benefit’because they receive fewer pension payments
before death. Though in some cases this may occur, it could
happen only in defined benefit plans. Under such an arrange-
ment, the employer pays a set amount in pension each year, and
thus an employee with a short postemployment lifespan may
end up receiving less in benefits than he paid into the fund
while employed. (By contrast, an employee with a long post-
employment lifespan may end up receiving more in benefits
than he paid into the system while employed.) Thus, smokers’
contributions to the company’s pension fund could theoretically
end up subsidising the retirement benefits of non-smokers.
More and more employers, however, are moving away from
defined benefit plans into defined contribution plans (such as
401(k)s).
37
In such plans, there is no potential for a ‘death
benefit’because the employee is entitled to all of the assets in
the fund—no more and no less—regardless of life span. The
employer may pay into the retirement fund during the course of
employment, but it does not make annual payments after
retirement.
Nonetheless, our cost estimate incorporates a ‘death benefit’
for those employers that still use defined benefit pension
Box 4 Excess healthcare costs
▸Cost
Ins
=(Employer Healthcare Expenditures×Adjusted SA
%)/Smoking Private Employee=$2055.77.
▸Cost
InsSmoker
: Cost of healthcare to self-insured private
employers for each smoking employee.
▸Employer Healthcare Expenditures: 2010 Total Healthcare
Expenditures by Private Employers ($534.5 billion).
▸Adjusted SA%: Smoking Attributable Fraction of healthcare
expenses (8%).
▸Smoking Private Employee: Number of employees in private
employment who smoke. (108 million×19.3%=20.8 million).
Box 3 Lost productivity due to breaks
▸Cost
Prod
=Cigarettes
day
×Time
onbreak
×Compensation×Days
Worked=$3077.14.
▸Cost
Prod
=Annual per-employee cost due to loss of
productivity.
▸Cigarettes
day
=Average number of cigarettes smoked per day
at work during non-sanctioned break periods (2).
▸Time
onbreak
=Time (in hours) taken to travel to smoking area
and consume each cigarette (0.25).
▸Compensation=Average hourly wage and benefits paid to an
employee who is a current smoker ($26.47).
▸Days Worked=Number of days worked per year (232.5).
Berman M, et al.Tob Control 2014;23:428–433. doi:10.1136/tobaccocontrol-2012-050888 431
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systems. Sloan et al
38
calculated the subsidy that smokers
provide to their employers through their use of the defined
benefit plans. They found that on average, each male smoker
subsidised non-smoker’s pension plans by $10 123, and each
female smoker by $383 (the variation is caused by the fact that,
on average, women have lower pension wealth than men).
39
The Sloan study was based on self-reported data collected from
more than 10 000 subjects for the Health and Retirement Study
at the University of Michigan Institute for Social Research. Our
research did not reveal any other recent studies that considered
the impact of smoking on defined benefit plans in the USA.
Using Sloan’snumbers,weestimatethe‘death benefit’per
smoker participating in a benefit plan by calculating the individual
contributions of male and female
39
workers in the private sector
to the subsidy, adjusting for inflation for 2010, and then annualis-
ing it by dividing the total over 24 years (the average number of
years of employment
38
) for a total of $295.50. Since, the amounts
were already discounted by Sloan et al, no discounting was per-
formed on these results. Again, it should be noted that only 21%
of all private employers use defined benefit pension plans,
40
and
an employer who does not have a defined contribution will not
benefit from such a subsidy (box 5).
EXCESS COSTS VERSUS MARKET COST
This paper examines only the excess costs of an employer hiring
a smoker under the employer’s existing benefits structure.
However, these costs may be partially offset if smokers are paid
lower average wages, as some research suggests that they are.
Cowan and Schwab, for example, found that of workers with
equivalent experience and occupation, a smoker enrolled with
employer sponsored health insurance will earn less than the
equivalent non-smoking worker insured through their employer,
averaging $1.72 less per hour or over $3400 per year in lower
wage income.
10
Our cost estimate suggests, however, that even
if employers pay lower wages at the levels suggested by Cowan
and Schwab to adjust for the cost of smoking employees, the
lower wages will not fully compensate for the additional costs
imposed.
CONCLUSIONS AND LIMITATIONS
Building upon the work of Javitz et al, the Conference Board of
Canada, and other previous studies, we have estimated that
employers face an annual excess cost of approximately $5816
for each employee who smokes. As noted above, this estimate
assumes that the employer is self-insured and maintains a
defined benefit pension system. When these assumptions are
incorrect, employers can adjust our cost estimate approach to
more accurately predict their own costs (eg, by ignoring the
excess cost for health insurance if they are not self-insured). We
caution, however, that our review does not include all possible
smoking-related costs. For example, employers may face higher
maintenance costs as a result of permitting smoking on the
premises. In addition, allowing smoking in the workplace may
lead to legal claims by employees exposed to secondhand
smoke.
41
Our cost estimate is built around several assumptions about
average costs. Average costs are just that—averages. For any
given particular employer, costs may be higher or lower due to
the makeup of employees or a variety of costs that vary by
industry. Our calculations can, however, be easily modified
where employers are aware of their costs. For example, employ-
ers could better estimate their own costs by using their com-
pany’s average per-hour wage in place of the national average.
It should also be noted that for some variables (such as absen-
teeism and healthcare costs), former smokers still impose higher
costs than never smokers. (Indeed, some evidence suggests that
the number of absences increases in the short term when an
employee quits smoking, though the level of absences drops in
the long run.
6
) In addition, effective smoking cessation pro-
grammes are not free. Thus, eliminating all costs described in
this paper may not be an obtainable goal. Nonetheless, employ-
ers can significantly reduce long-term costs by implementing
smoking cessation programmes.
42
Employers with the largest
numbers of smoking employees have the most potential to
benefit from helping employees to quit smoking, and Halpern
et al
43
estimate that the benefits of a worksite cessation pro-
gramme are likely to outweigh the costs to employers in
approximately 4 years.
As suggested above, employers may also consider reducing
smoking-related excess costs by hiring only non-smokers or
increasing healthcare premiums for non-smokers. The ethical
and legal implications of such policies have been extensively dis-
cussed elsewhere,
44–49
including by two authors of this paper.
50
The purpose of this paper is to provide needed factual context
to discussions about worksite tobacco policies, not to add to the
debate on the normative value of such policies. What seems
clear, however, is that this evidence does not simply relate to a
dispute about whether an employer has a moral or legal right to
regulate behaviour that occurs away from the workplace. These
substantial costs detailed in this paper suggest that the employee
brings his or her addiction to work even if the act of smoking
occurs elsewhere. This is not unexpected, as smoked nicotine is
a powerful modulator of important neurotransmitters and its
effects persist well beyond the time spent with a cigarette. Just
as employers may reasonably address the behavioural side
effects of alcohol abuse or legal use of prescribed narcotics, they
may have a valid interest in the workplace effects of legal
tobacco use that occurs off-premises. Of course other counter-
vailing concerns, such as the potential of ‘smoker-free work-
force’policies to further exacerbate existing health disparities,
must also be considered.
44 48
In addition, it should be noted
that employer policies to hire only non-smokers are not legal in
all states.
50
Finally, we need to point out two obvious, yet often over-
looked facts. First, it is important to remember that the costs
imposed by tobacco use are not simply financial costs. It is not
possible to put a price on the lost lives and the human suffering
caused by smoking. The desire to help one’s employees lead
Box 5 Death benefit
▸Subsidy=((Subsidy Male×Percent Male) + (Subsidy
Female×Percent Female))×Inflation/Years Worked=$295.50.
▸Subsidy: Benefit offered by smoker to a private
defined-benefit plan offering employer.
▸Subsidy Male: Subsidy of male a smoker ($10 123).
▸Percent Male: percent of male workers in the private
industry (53.4%).
▸Subsidy Female: Subsidy of female smoker ($383).
▸Percent Female: Percent of female workers in the private
industry (46.6%).
▸Inflation adjustment: Adjustment for inflation from 2000.
▸Years Worked: Average number of years the smoker
contributes the subsidy (24).
432 Berman M, et al.Tob Control 2014;23:428–433. doi:10.1136/tobaccocontrol-2012-050888
Research paper
group.bmj.com on August 14, 2014 - Published by tobaccocontrol.bmj.comDownloaded from

healthier and longer lives should provide an additional impetus
for employers to work towards eliminating tobacco from the
workplace. Second, many current smokers are addicted in large
part because of the tobacco industry’s aggressive advertising of a
deadly product and because of the industry’s decades-long cam-
paign to hide and distort the truth about the dangers of
smoking. The need for private action to eliminate smoking from
the workplace should not detract from efforts to implement
public policy changes (such a smoke-free workplace laws, higher
cigarette taxes, and increased funding for counter-marketing
programmes) that will counteract the industry’s advertising and
reduce smoking prevalence in the next generation.
What this paper adds
▸Numerous studies have demonstrated that employees who
smoke tobacco have higher levels of absenteeism,
presenteeism and healthcare costs, in comparison to
employees who do not smoke.
▸No previous US studies have aggregated these costs to
quantify the excess costs that employees who smoke
tobacco impose on their employers.
▸By analysing previous studies, we estimate that US
businesses incur excess costs in the range of $5816 per year
for each employee who smokes.
▸Such information may help inform employer decisions about
tobacco-related policies.
Contributors MLB and RC conceived the article and drafted the initial manuscript.
MM provided supporting research, helped design the cost estimation approach, and
reviewed drafts. ES reviewed drafts and contributed to the analysis.
Competing interests None.
Provenance and peer review Not commissioned; externally peer reviewed.
Data sharing statement No additional data are available.
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Berman M, et al.Tob Control 2014;23:428–433. doi:10.1136/tobaccocontrol-2012-050888 433
Research paper
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doi: 10.1136/tobaccocontrol-2012-050888
2014 23: 428-433 originally published online June 3, 2013Tob Control
Micah Berman, Rob Crane, Eric Seiber, et al.
Estimating the cost of a smoking employee
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