In this article, we examine the indirect costs (ie, work loss and productiv
ity costs) of employee illness from the employer's perspective. We provide
a conceptual framework to help employers consider alternative views with re
gard to assessing indirect costs and valuing the health care they purchase.
First, we discuss the matter of perspective and how an employer should vie
w and assess indirect costs. We briefly review current models of measuring
indirect costs, and we critique these models. Then we introduce a simple, c
onceptual framework based on the ideas of health capital and labor producti
vity, and we lay out the effects of health investment on indirect costs whi
le considering what employees desire and employers can provide. Finally, we
offer an agenda for further research.