Cost of Absenteeism

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Welcome to the December 10, 2008 issue of The Total View

Published by Success Performance Solutions

Major Sponsor of
2008 Best Places to Work In Pennsylvania

Edited and Written by Ira S. Wolfe

NEW! Check out our new flash presentation at Success Performance Solutions

Visit our Human Resources Blog and Perfect Labor Storm Blog where we can post daily (and more often) human resource updates, news, and Perfect Labor Storm facts.

What's Inside this issue of The TotalView:

1. How much does absenteeism cost your business?

2. Perfect Labor Storm Warnings

3. The Lighter Side of absenteeism

4. Quotes from the Hire Authorities

1. How much does absenteeism cost your business?

It's no secret that missing workers cost companies millions of dollars in lost revenue each year. But exactly how much does absenteeism cost your business?

According to a new survey by Mercer, "The Total Financial Impact of Employee Absences," the total cost of absence can equal as much as 36% of payroll (compared to 15.4% for health care coverage). Of that figure, 9% accounts for unplanned absences. Planned absences, like vacations and holidays, average 26.6%. For a midsize business, this unplanned absence can account for as much as $4.5 million dollars per year.

Tthis new survey suggests that absences cost employers more than half the cost of health care, a startling number and a call to action for all organizations to get a better handle on this often unchecked cost.

Unplanned absences like casual sick days result in the highest per-day productivity loss, 21% versus just 15% for planned absences like vacation days. On average, employees have 5.3 unplanned absence days per year.

Employers must consider both the direct and indirect costs incurred when an employee is absent. Direct costs are the most obvious and those usually tracked by employers. Direct costs are the benefits paid to the employee to provide income during an absence. These include sick, holiday and vacation pay as well as a disability benefit when available.

The real impact to the organizations comes in the form of indirect cost. These costs are typically ignored or poorly tracked but account for a considerable loss dropped to the bottom line. Indirect costs are represented by:

The employee's absence affects coworkers and slows down a project's completion.
The absent employee's work is "covered" by coworkers, a temporary worker, "floaters," or the employee's supervisor.
An ample supply of replacement workers slows but does not stop the "bleeding."

Replacement workers are less efficient:

71% as efficient during unplanned incidental absences
79% as efficient during planned absences
80% as efficient during extended absences
The work output of 4 to 8 co-workers was reduced by 19%

Both types of impacts significantly add indirect costs.

What can you do to manage the costs of absenteeism?

Know your costs.
Use the ratios of total costs to direct costs to estimate your organization's total costs.

Educate your staff and managers on:

What the real costs of absences are.
What other employers are doing (or not doing) to better track and manage absences.

2. Perfect Labor Storm Warnings

Subscribe to the Perfect Labor Storm 2.0 blog and receive skilled worker shortage updates like this:

Baby Boom Generation workforce participation will shrink from 44% in 2006 to 38% in 2011.

Generation X workforce participation will shrink from 33% in 2006 to 32% in 2011.

Millennial (Gen Y) Generation workforce participation will increase from 15% in 2006 to 25% in 2011, a 66% increase.

Learn more about workforce trends. Purchase the NEW Perfect Labor Storm 2.0 books (soft and hard cover versions) at PerfectLaborStorm.com.

New Perfect Labor Storm videos added. Watch now!

3. The Lighter Side of Absenteeism

An annual survey on absenteeism indicates that 33 percent of workers have called in sick at least one day this year when they were not. Nine percent of those who faked illness did so in order to miss a meeting, to have extra time to work on a project already due, or to avoid an angry boss or colleague. Thirty percent missed work in order to relax and recharge, 27 percent to go to a doctor's appointment, 22 percent to catch up on sleep, 14 percent to run errands, 11 percent to catch up on housework and 34 percent didn't feel like going to work that day.

Some of the unusual excuses employers were given for having to miss work included:

Employee hit a turkey while riding a bike.
Employee donated too much blood.
Employee swallowed too much mouthwash.
Employee's wife burned all of his clothes and he had nothing to wear to work.
Employee's psychic told her to stay home.
Employee was kicked by a deer.

Source: careerbuilder.com

4. Quotes from Hire Authorities

"People resemble their times more than they resemble their parents."

Arab proverb

Permission is granted to consultants, managers, business owners and HR professionals to reproduce content from this newsletter for your internal publications, or to distribute copies to your workforce, on the condition that you reproduce the credits and contact information as follows: "Reprinted with permission from Ira S Wolfe and Success Performance Solutions. Copyright 2008 Ira S Wolfe." We also hope you will forward the newsletter in its entirety and recommend to others that they subscribe.