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