Absenteeism could be eating up 22% of your total payroll costs
Everybody’s aware of the disruptive effect of employee absenteeism. But how much does absenteeism really cost?
Employee absences have a moderate to large impact on productivity and revenue, according to 75% of respondents to a recent Society for Human Resource Management (SHRM) study.
The Total Financial Impact of Employee Absences Survey was conducted in collaboration with and commissioned by Kronos Incorporated. It found that the direct cost of paid time off for full-time employees in 2013 — accounting for wages, overtime and replacement workers — was equivalent to 15.4% of payroll.
When indirect costs such as lost productivity were added, the total cost of paid time off was between 20.9% and 22.1% of payroll, with unplanned absences having the highest overall cost.
Five wasted weeks
Supervisors spent an average of 4.2 hours a week — or 5.3 weeks a year — dealing with absences, including finding replacements, adjusting workflow and providing training, the survey showed.
On average, supervisors were perceived to be 15.7% less productive and co-workers 29.5% less productive when providing coverage for a typical absence day.
The highest average loss in productivity, 36.6%, was the result of replacement workers being used to cover for an unplanned absence, making this type of absence the greatest cause for concern in controlling costs.
And here’s a stat that came as no surprise: Seventy-two percent of respondents said they noticed more unplanned absences on Mondays and Fridays and before holidays, sporting events and national events.
The survey also showed:
- Overtime was used to cover 47% of employee absences.
- More than one-quarter (27%) of respondents familiar with the annual cost of administering Family and Medical Leave Act (FMLA) leave reported it being between $10,000 and $19,999. Of all respondents, 34% indicated that they did not know the expense of administering FMLA leave.
- About three-fifths to two-thirds of organizations (58% to 71%, depending upon the employee type) have formal, written attendance policies.
- Two-thirds (66%) of respondents said their employees request time off by using a form or sending an email.
The importance of accurate recordkeeping
“These results show that tracking paid time off is important not only for ensuring that employees are treated consistently but also for controlling costs related to paid absences,” said Evren Esen, SHRM’s director of survey programs.
Most organizations use technology to track employee time and absences, with 35% of organizations using an integrated system as a component or module of an HR information system and 29% using automated third-party software. But 15% of organizations reported using manual processes.
