Controlling Costs Through Effective Absence Management

In an era where concerns about controlling costs is more crucial than ever, managing employee absenteeism is one area where HR departments are empowered to make a real impact on the organization’s bottom line. A cost analysis from a Mercer report entitled The Total Financial Impact of Employee Absences found that the total cost (direct and indirect) of all absence categories (scheduled and unscheduled) averaged 36% of total payroll. The most costly days, the analysis continued, were unscheduled absences- largely attributable to the indirect costs associated with higher rates of lost productivity for these types of absences.

So what are Northeast Ohio employers doing to help minimize what is clearly a large financial burden on employers across the nation? According to the ERC Absence Management Practices Survey, simply recording these absences is the most popular method, with 94% of respondents indicating this basic tracking method is how they manage or control absences. Other top reported methods include “disciplinary actions” (74%) and “using attendance as a performance criterion” (70%).

Interestingly, manufacturers are approximately 30% more likely than non-manufacturers to utilize these more structured measures, which in some cases even have direct ties to rates of compensation. In contrast, non-manufacturers trended towards more forgiving strategies such as “flexible work arrangements” and “paid time-off banks.”

Unsurprisingly, “illness” (88%) is the most common reason for unscheduled absence, with “home/family obligations” and “child-care issues” next in line at 61% and 54% respectively. To combat these issues specifically, 44% of participants reported allocating “family leave” as part of their overall attendance policy and 29% of organizations pointed to “wellness programs”- a key preventative measure to help combat unscheduled absences due to illness at the root of the problem.

Overall, the Absence Management survey reported that the average number of days lost per employee per year due to unscheduled absences is 3.9 days, a number 1.4 days better than the average reported by the Mercer report on the national level.