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Disability management: Ignoring employee absences may prove costly for organizations

Author: Yosie Saint-Cyr

Posted on Wednesday, July 7th, 2010 at 10:00

A while back, the Conference Board of Canada (CBoC) came out with a study that found while workplace absenteeism continues to rise, Canadian employers take a “relaxed” approach to tracking employee absences and measuring their cost. According to the study, the absenteeism rate has been increasing steadily in the past decade, rising to 6.6 days per full-time employee in 2008–09 from 5.7 days in 2000–01, the most recent fiscal year. This is the highest point since the board began surveying employee absences 20 years ago.

The cost associated with employee absenteeism is commonly defined as time off from work that is avoidable, habitual and unscheduled; it does not include vacation time, public holidays or granted leaves of absence. Payroll specialists estimate that the current average cost of absenteeism is 2.6 percent of payroll budgets. Absenteeism can take a financial toll on a small business, as well as larger companies for that matter, in several different respects.

There are several significant implications to organizations not tracking and ignoring employee absences, including:

• Lost wages/salaries due to paid sick leave
• Pay for temporary workers or overtime work
• Benefits payments
• Reduced productivity/substandard production
• Poor management of disability programs
• Poor work environment
• Possible loss of business or dissatisfied customers

Most small business employers simply are not equipped to address these issues as well as they might like. In addition, many small business owners do not have or think they need absenteeism policies, sick pay benefits or a disability management program because they have so few employees, or very small budgets or revenue streams.

However, the CBoC report indicates that the absenteeism rate reported by Canadian organizations is higher than the rate found in both the United States and United Kingdom. According to data from consulting group Mercer, organizations in the US had an absenteeism rate of 5.3 days per year in a survey conducted in mid-2008. According to data from SimplyHealth, organizations in the UK had an absenteeism rate of “less than 5 days per year” in a survey conducted in early 2009.

Canadian organizations do need to look at this matter more closely because it is affecting their bottom lines no matter their size. There are several steps organizations can take to better manage absenteeism, including:

• Establishing an absenteeism policy and program that comply with legal requirements
• Identifying the root causes of absenteeism
• Taking proactive steps to improve the health and well-being of employees
• Having a return-to-work program in place
• Focusing on communication and education
• Getting involved early when employees are absent
• Keeping in constant contact with employees on leave

The policy should also state explicitly the allowable number of absences, the consequences of excessive absenteeism, and other relevant aspects of the policy. Addressing absences, tardiness, failure to call in and leaving early, how to request a leave of absence, medical information required and in what format, how and when to communicate, return-to-work processes, in a formal policy can prevent misconceptions about acceptable behaviour, inconsistent discipline, complaints of favouritism, morale problems and charges of discrimination.

Absenteeism policies are useless if the organization does not also implement and maintain an effective system for tracking employee attendance. Without such a system, employers can’t know if they have a problem or if their policy and/or disability management program are working.

The system should be able to:

• Keep an accurate count of individual employee absences
• Tabulate company-wide absenteeism totals
• Calculate the financial impact that these absences have on the business
• Detect periods when absences are particularly high
• Differentiate between various types of absence

Solution/ideas
Having a human resources management system in place help organizations track employee absences easily and use the tracked data to measure the cost associated with employee absenteeism. First Reference has such a system available for small to medium size businesses.

When using the HRtrack human resource management system from First Reference, you will be able to do the above and record different types of leave, including:

• Vacation entitlements
• Sickness and injury
• Statutory types of leave
• Training and development days
• Other types of leave (employer-provided)
• Whole day and half-day leaves

The HRtrack vacation and leaves module allows you to easily:

• View individual and departmental leave records
• Assess current, future and historical absence data
• Sort records by department, individual employee or set of individuals
• Record annual leave requests and days to be taken
• Approve leave of absence requests
• Record sickness and injury absences
• Monitor absence, sickness and injury absence levels
• Review, approve and record training and development days
• Add your own legend items for company-specific types of leave

Moreover, HRtrack will help you differentiate between excused and unexcused absences and collect the required data (absences) that are most disruptive to the workplace and have the most impact on productivity.

The filtered, accurate and reliable absenteeism data extracted from HRtrack will help organizations detect, monitor and report on absenteeism.

From the extracted data, you will be able to obtain monthly and yearly absenteeism rates using the following formulas:

For the monthly absenteeism rate:

1. Total number of days lost through job absence in the month: ________
2. Number of employees on 1st of the month: _____
3. Number of employees on the last day of the month: _____
4. Average headcount for the month (Line 2 + Line 3 divided by 2): ____
5. Number of available workdays in the month: ____
6. Average number of workdays for the month (Line 4 x Line 5): ______
7. Monthly absenteeism rate (Line 1 divided by Line 6 x 100): _____

For the annual absenteeism rate:

1. Assume a 365 base scheduling year
2. Base – weekends + public holidays = 365 – 113 = 252
2. List all planned leaves, absenteeism and other reasons why an employee is not deployable, including regular days off
3. Calculate the average annual not deployable DAYS for each reason and the total of all reasons
4. Convert into an annual total
5. Subtract the total not deployable days average from a 364-day base scheduling year
6. Divide the base year by the total average deployable days

You will also be able to calculate the frequency rate of absence. This rate reflects the incidence of absence and is usually expressed as the number of separate absences in a given period, irrespective of the lengths of the absences. The frequency rate represents the average number of absences per worker in a given period.

For the frequency rate of absence:

Frequency Rate = total number of times in which the leave was used x 100
/ total number of person days scheduled to work

Track, monitor and manage absenteeism
The printable HRtrack absence reports will help you identify trends and patterns across your organization that may highlight issues such as recurrent or excessive absences.

Once you are able to track the data and calculate your absenteeism rate using HRtrack, you will know if you have an attendance/absenteeism problem and what steps to take to reduce and control it and improve the attendance rate. With proper records, you will also be able to evaluate and modify company policies and procedures to ensure that the correct framework exists within which to manage and control absenteeism.

Absence levels can be reduced through effective HRtrack monitoring and management, sending employees a clear message that you take sickness and absences seriously.

Yosie Saint-Cyr
First Reference Human Resources and Compliance Managing Editor

Tags: Absenteeism, absenteeism policies, absenteeism rate, attendance/absenteeism problem, average cost of absenteeism, Conference Board of Canada, cost associated with employee absenteeism, employee absences, employee attendance, employment law, HRMS, managing absenteeism, sick pay benefits, time off from work, tracking employee absences

This entry was posted on Wednesday, July 7th, 2010 at 10:00 and is filed under Benefits, HRMS, Human Resources, Payroll. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.