HR Analytics: Absenteeism and the cost to your business

One of the biggest costs in running a business is usually staff salaries. When assessing the cost of absenteeism, it can be quite shocking to see the amount of money a company can lose just because people don’t come to work as expected. There may be many reasons why staff can’t get to work, from illness to transport problems to personal issues. It’s difficult for a business owner to have control over these events, but the fact remains that absenteeism has a big impact on the bottom line of any business.

Types of absenteeism

There are three different types of absenteeism that have an impact on any company:

  • Scheduled absences consist of leave or personal time out (PTO).
  • Unscheduled absences include sick days, disability, and Worker’s Compensation leave.
  • Partial shift absences are when a worker arrives late at work, takes longer breaks than allowed, or leaves early.

Reasons for absence

Whilst some absenteeism can be expected, excessive days off can lead to decreased productivity and financial loss for the company. Some of the common causes include:

Illness: medical appointments spiking in the flu season in particular, along with: asthma, cancer, depression, diabetes, heart attack, high blood pressure, high cholesterol or obesity
Injuries: accidents causing chronic conditions such as back and neck issues
Bullying and harassment: employees who are bullied or harassed by coworkers and/or bosses
Burnout, stress and low morale: heavy workloads, stressful meetings/presentations and feelings of being unappreciated
Personal stress: issues outside of work, in the home or personal life
Childcare or elderly care responsibility: circumstances that may force employees to stay home and take care of a child or elderly person
Depression: a leading cause – exacerbated by substance abuse
Lack of commitment: lack of interest in the job and therefore no motivation to go to work

The tracking solutions

To expect absenteeism to go away entirely is wishful thinking; it will always be a bugbear of most businesses. However, there are ways to reduce the occurrence and to control the impact on the business. A system for tracking hours worked is important – and there are tools to assist with this task. Keeping track of card-clocking, personal time out, days leave, days sick, etc, is vital to knowing where people and the system are weakest.

Highlighting patterns can help with cost savings. Attendance trackers provide more accurate reports, patterns, and root causes for managers to act upon. When employees know this is the case, there is usually a lower rate of absenteeism. Tracking absences, assists managers to forecast and improve schedules, resulting in more motivated and productive employees. Tracking employees’ hours also ensures that overtime limits are not surpassed, reducing burnout and improving productivity.

Costs to companies

Absenteeism costs the South African economy as much as 19 billion annually. Most companies have an allotted amount of absentee days that are allowed. However, if employees take advantage of this, it has serious ramifications for productivity and the bottom line profits of your business. That’s why absenteeism should be measured regularly – you need to know if your employees are often absent without valid reasons.

The business costs associated with absenteeism can be as follows: having to replace workers who are absent with temporary staff; paying out wages for people who are not at work; overtime pay for employees who are forced to make up the gap; dip in productivity because of no-show employees; decline in products or services standards; loss of morale in the remaining workforce who have to cover for those not at work; increasing staff turnover due to stress factors caused by continual absenteeism; impact of loss of revenue.

What employers can do

Absenteeism is an especially difficult problem to tackle, because there are both legitimate and suspect excuses for missing work – and it can be challenging to discern what is genuine and what is abuse of the system. Even a written excuse from a doctor is not necessarily proof that the complaint was serious enough to miss work. Methods of response can include:

  • A sick leave policy that sees employees granted a specific number of days sick leave per year. The argument against this is that some employees will make sure they take that exact number of days off regardless as to whether they are sick or not. But it’s a balancing act between integrity and pragmatism. People who are genuinely sick need their number of days off to recover fully and not bring the germs to work, whereupon the absence of many others will actually cost the company even more money.
  • Another method of response is to offer rewards to employees with high attendance records, such as a bonus, or more time off, or longer leave.
  • Putting policies in place that focus on employee wellbeing is another approach. Keeping track of health concerns is important, such as: physical and psychological health; work/life balance; and financial troubles. The logic is that healthier, happier employees will be more able and motivated to go to work each day, resulting in increased productivity and higher morale and team spirit.
  • Although employee wellness principles may be expensive to implement, they are invariably useful and positive in protecting the company’s bottom line.

The Absenteeism Formula

((# of unexcused absences)/total period) x 100 = % of Absenteeism

Without understanding how to use the full formula to quantify the impact of absenteeism, and how to apply its results, an HR professional is only reporting numbers without showing the impact. In our Workshops at the HR Analytics Institute we train HR professionals in the formula and how to use it in calculating the cost of absenteeism holistically; how to apply it, report on, and show the financial benefits of managing this cost to the business effectively.

The new value of Human Resources

At the HR Analytics Institute we believe there is a smarter way to get the best out of your staff and improve your business. Not only do we clearly see the potential to improve business through better relationships, but we are passionate about training HR practitioners to understand the value of their interface role between staff and management. Our practical courses will enable you to play a far greater role in strategic decision-making within the business as a whole.

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