The Hidden Costs of Absenteeism

Question 1

“We should cut absences to zero, because employees should be expected to show up when they are scheduled.”

Why is this statement problemmatic?

Answer 1

• Sometimes it is cost-effective just to tolerate the absence level and allow work to be missed or employees to adjust.
• In other situations, it is very cost-effective to invest in ways to reduce absence. It depends on the situation.

Question 2

What is the formal definition of absenteeism?

Answer 2

• Absenteeism is any failure to report for or remain at work as scheduled, regardless of reason.
• The use of the words “as scheduled” is significant, for this automatically excludes vacation, personal leave, jury-duty leave, and the like.

Question 3

In general (at least according to a 2008 Mercer survey of 465 companies), how much does unscheduled employee absenteeism cost in terms of percentage of payroll?

Answer 3

• 9%

Question 4

What are direct costs of absenteeism?

Answer 4

• Direct costs include actual benefits paid to employees such as
  
  • sick leave
  • short-term disability
  • long-term disability

Question 5

What are indirect costs of absenteeism?

Answer 5

• Indirect costs reflect reduced productivity such as
  
  • delays
  • reduced morale of coworkers
  • lower productivity of replacement employees

Question 6

According to the attendance model discussed in class, what are the primary factors that determine attendance–that is, whether or not an employee shows up and remains for scheduled work?

Answer 6

• Ability to Attend
• Pressures to Attend
• Job Satisfaction

Question 7

What are the primary factors associated with the ability to attend in the attendance model?

Answer 7

• illness and accidents
• family responsibilities
• transportation problems

Question 8

What are the primary factors associated with pressures to attend in the attendance model?

Answer 8

• economic/market conditions
• incentive/reward systems
• work group norms
• personal work ethic
• organizational commitment

Question 9

When is absence more “pivotal” (i.e., changes in absence affect economic and strategic success more?)

Answer 9

• Others have to perform the work of the absent employee.
• A process must be stopped because of the absence of an employee.
• Activities must occur at a certain time and are delayed or missed because an employee is absent.

Question 10

At a general level, what are the four categories of costs associated with employee absenteeism?

Answer 10

• Costs associated with absentees themselves (employee benefits and, if they are paid, wages)
• Costs associated with managing absenteeism problems (costs associated with supervisors’ time spent dealing with operational issues caused by the failure of one or more employees to come to work)
• The costs of substitute employees (for example, costs of overtime to other employees or costs of temporary help)
• The costs of reduced quantity or quality of work outputs (for example, costs of machine downtime, reduced productivity of replacement workers, increased scrap and reworks, poor customer service)

Question 11

How do you calculate the absenteeism rate in days?

Answer 11

Absenteeism rate = [Absence days / Average work force size] × working days

Example:

1. Total number of days lost through job absence in the month: 16
2. Number of employees on 1st of the month: 62
3. Number of employees on the last day of the month: 60
4. Average headcount for the month: (62 + 60)/2 = 61
5. Number of available workdays for the month (for a monthly absenteeism rate): 21 (Note: This will vary by month. That is some months have more potential workdays than others.)
6. Total average number of workdays for the month: 61 X 21 = 1281
7. Monthly absenteeism rate: (16/1281) X 100 = 1.2%

Question 12

How do you calculate the absenteeism rate in hours?

Answer 12

Absenteeism rate = [Hours missed / Average work force size] × working hours

Example:

1. Total number of hours lost through job absence in the month: 128
2. Number of employees on 1st of the month: 62
3. Number of employees on the last day of the month: 60
4. Average headcount for the month: (62 + 60)/2 = 61
5. Number of available work hours for the month (for a monthly absenteeism rate): 168 (Note: This will vary by month. Some months have more potential work hours than others.)
6. Total average number of work hours for the month: 61 X 168 = 10248
7. Monthly absenteeism rate: (168/10248) X 100 = 1.6%

Question 13

Assuming two weeks vacation and 5 paid holidays, how many working hours are there in a year?

Answer 13

52 X 40 = 2080

2080 - 80 (vacation hours) - 40 (holiday hours) = 1960

Question 14

Assuming two weeks vacation and 5 paid holidays how many work days are there in a year?

Answer 14

52 X 5 = 260

260 - 10 (vacation days) - 5 (paid holidays) = 245

Question 15

How do you interpret monthly absence rates for all employers? (like we did in class and like figure 3-4 in the textbook)

Answer 15

Write your own answer for this one using figure 3-4 in your textbook.

Question 16

About what percentage of total compensation do the cost of benefits currently account for?

Answer 16

• 39%

Question 17

What is a good procedure for interpreting absenteeism costs in a meaningful manner to managers and others outside of HR? In other words, when you are working in HR, how will you do this?

Answer 17

1. Begin by evaluating absenteeism costs—at least initially—against some predetermined cost standard or financial measure of performance, such as an industry-wide average.
2. Look for evidence that levels of paid time off in your organization are higher than standard, or benchmarks. Suggest how much sick leave or unscheduled vacation days might be reduced if absence is reduced in your organization.
3. Provide evidence that time spent by managers on dealing with absenteeism will be reduced in your organization if attendance improves.
4. Discuss how much pay for lost time in your organization would be reduced if some of the extra employees could be deployed elsewhere or even removed from the workforce.
5. Make the connection between absenteeism and reduced worker quantity or quality in your organization. Note the connection between the fact that when a particular worker fails to be at work, specific things don’t get done, customers don’t get served, or teams have to operate with less than full contributions. Use real examples from your organization.

Question 18

What are alternative approaches to organization-wide absenteeism-control methods? Explain how you would match the appropriate absenteeism-control method to a particular situation.

Answer 18

• provide rewards for good attendance
• use progressive discipline for absenteeism
• keep daily attendance records
• provide flexible work schedules
• use job redesign to increase motivation to attend
• implement improved safety measures so employees don’t miss work due to injuries

Use the attendance model discussed in class to identify the particular cause (job satisfaction, ability to attend, pressure to attend) of absenteeism and then match the program to fit the cause.

Question 19

Attendance incentives may result in “symptom substitution.” What does that mean?

Answer 19

• It means you might get less absenteeism but more of something else undesirable, that is other withdrawal behaviors.
• SLymptom substitution means that declining absence is accompanied by increased tardiness and idling, decreased productivity, and even turnover.

Question 20

How does paid time off work?

Answer 20

• This approach to controlling absenteeism and the abuse of sick leave is based on the concept of consolidated annual leave.
• Sick days, vacation time, and holidays are consolidated into one “bank” to be drawn out at the employee’s discretion.
• The number of paid time off (PTO) days that employees receive varies across employers.
• Employees manage their own sick and vacation time and are free to take a day off without having to offer an explanation.
• If an employee uses up all of this time before the end of the year and needs a day off, that time is unpaid.

Question 21

What are the potential negative side effects of absence-control programs?

Answer 21

• Paid-time-off policies may suppress absences only until employees reach the paid threshhold, at which time they may take a lot of sick leave.
• Punishments, or stricter enforcement of penalties for
  one type of absence, tend to instigate other forms of missing work (“symptom substitution”).

Question 22

What is presenteeism? What are the major reasons it occurs?

Answer 22

• Presenteeism results from employees showing up but working at subpar levels due to chronic ailments, and it is more sensitive to working-time arrangements than absenteeism is.
• It is a form of withdrawal behavior.
• Major reasons for presenteeism include a sense of obligation to coworkers, too much work, and impending deadlines.