Check out U.S. corporations, British, Canadian, and Japanese businesses, and you’ll find they all report high costs in employee absenteeism. The reasons vary only slightly, and they provide no ranking. Ranking may be tough because reasons overlap and inter-relate. But, the direct and indirect costs are sizeable, immediate and difficult to solve.
We might call basic reasons for absence “legitimate.” They are normal, expected, and reasonable. Employees miss work for mundane reasons like illness and injury. People get sick, keep doctor’s appointments, and treat colds and flus. They also get hurt in trips, falls, and vehicle accidents outside work. The Bureau of Labor Statistics (2015), claimed, “About 3.5 million workers missed work in January 2015 because they had an illness, injury, or medical problem or appointment. ”Bereavement causes some people more pain than others.
Most companies have reasonable to generous bereavement policies, but some employees lose time for related depression, emotional problems, and physical issues. Natural disasters - hurricanes, earthquakes, and tornadoes – will interfere with employees’ ability to reach work, and companies should have practices in place to handle such event. Other causes are less legitimate in the sense that they might be managed, prevented, and disciplined. It’s not that they are false, but they can lead to subjective assessments that complicate best practices.
Even though more employees report working while they are sick, The Centers for Disease Control and Prevention (CDC) (2015) reports, “productivity losses linked to absenteeism cost employers $225.8 billion annually in the United States, or $1,685 per employee.”
Calculations vary from one business to another. Each has different demands, policies, and practices. But, if you start with an integrated HCM system like ClayHR’s, you have a time-off reporting system that pushes some of the accountability to the employee to track PTO and submit time-off plans for approvals. It creates one important tool for forecasting, budgeting, and labor resource allocation. If you assume that employee benefits run 20 percent of salary, you can calculate the cost of absenteeism:
= Line 1 X Line 4a or Line 4b:______
Temp workers, redone work, lost production, etc.______
= Line 5 + Line 6:______A simpler approach might be to calculate the employee’s salary + 30% employer costs divided by 240 working days (in a calendar year).
Today’s analytics can break this cost down more definitively. For example, the CDC has reported how employees with certain habits and physical conditions track. Of the 229,615 individuals studied, 27.4% were smokers, 55.9% were physically inactive, 26.0% were obese, 18.0% suffered from hypertension, and 4.8% reported diabetes.
The numbers also showed that workers with one of these conditions would miss 2 to 2.3 excess workdays each year. People with two or three of these problems would miss 3.7 to 4.5 workdays. And, those with four or five of these health issues would miss 4.4 to 8.6 days. For example, the dollar impact for absenteeism associated with obesity reaches $11.2 billion.
For diabetes problems, it may even exceed that. This justifies the corporate expense in supporting wellness programs. But, if leadership understands the true cost of employee absence, it must take more aggressive steps to manage, reduce, and prevent the costs. In addition to wellness programs, businesses are advised to:
If employees abuse attendance policies, you must correct their problem behavior or terminate them. If their attendance problems result from lack of clear policy, you must implement one. If their attendance relates to workplace injuries, you must comply with applicable laws and still support their recovery and return to work.
If your insurance clams and loss ratios indicate concerns in wellness, your business will benefit from wellness programs focused on those conditions.
The true cost of employee absence is significant enough that you must commit to the cost of prevention, control, and remediation.