Management

Absent - at what cost?

What is the cost to an organisation of an employee being off work? Why are they likely to be off work? This article looks at the 2008 Absence Management report by the Chartered Institute of Personnel and Development (CIPD)

The Chartered Institute of Personnel and Development (CIPD) have carried out an annual survey on employee absence since 1999, and the 2008 report contains some interesting information for employers.

The survey separates results for manual and non manual workers, and identifies four working sectors - Manufacturing, Private services, Non profit organisations, and Public services.

The rate of absence

The average level of employee absences has reduced in 2008 from 8.4 to 8.0 days, averaged across all sectors. This equates to working time lost of 3.5% (down 0.2%). Only 72% of organisations actually record their average absence level, meaning 28% have no method of measuring or tracking improvements.

The highest average rate of absence was in Public Services with a sector average of 9.8 days lost per employee per year, however, when the figures for Education are removed, the average goes up to 10.8 days, nearly 5% of working time lost.

The highest average absence rates were recorded in Communications (14 days), Call Centres (13 days), and Health (12 days). When looking at data for non manual workers, the Communications sector’s figures increase to 20 days, equivalent to 9% of working time.

To put some perspective on these figures, taking the Health sector as an example, the reported figures suggest that managers should allow for each employee being off for 5% of their working time. So for each team of twenty staff, you could have one additional full time member of staff employed purely as absence cover.

The causes of absence

For non manual workers, the main cause of short term absence is minor illness such as colds, flu and stomach upsets. The next major cause of absence is stress. When you consider that one of the effects of stress is to lower the bodies resistance to minor illness such as colds, flu and stomach upsets, we have a possibly larger footprint for stress related absence. The number one cause of long term absence amongst non manual workers is stress.

Some key points from the survey, related to stress, are:

• 72% of Public Services, and 66% of non profit organisations (NPOs) cited stress as leading cause of short term absence (national average is 54%);
• 45% of NPOs cited mental ill-health as a leading cause of short term absence, compared with only 21% of Private Services;
• 82% of Public services and 76% of NPOs cited stress as the leading cause of long term illness.

From the data, it would appear that whilst all sectors consider stress to be a major factor in both short and long term absence, Public Services and NPOs responses were significantly above other sectors, and the average, in attributing absence to stress and mental ill-health.

The cost of absence

The headline figure is that the average cost of absence has increased to £666 per employee, per year, up from £659 in 2007. However, this is not the whole story - the report provide more detailed figures for analysis.

Firstly, how is the cost of absence calculated? The respondents provided flat figures, however, they were asked to note what costs they had included. Roughly two thirds of organisations included occupational and statutory sick pay in their calculations, however, only 40% included the cost of replacement labour and only 32% included the cost of additional overtime. Less than 20% of organisations considered the cost of reduced performance and direct administration costs as part of the cost of absence.

Whilst all sectors saw an increase in costs, the biggest change was in Public Services, where the average cost rose from £732 to £936 in 12 months.

Some key points from the survey related to costs are:

• The highest cost of absence per sector was Public Services with £906 per employee per annum, with “Health” and “Other Public Services” having costs of £1,153 and £1,333 respectively;
• Three sectors had costs in excess of £1,000 per employee per year, Health, Other public services and Call Centres;
• The Private Services sector had the lowest costs with an average of £663, with 50% of sectors significantly below the national average cost of £666;
• The Public Services sector had the highest costs with 40% of the sector with costs twice the national average.

It should be noted that only 40% of the total respondents had data on the cost of absence, but it should also be noted that there are several factors that influence the cost of absence. More workers on short term absences will increase the overall cost, as will more workers on long term absence, and longer terms of absence. In addition, as noted above, the decision on which direct costs are included in the absence cost will also affect the overall cost. So the costs should not be used as hard measure of absence rates, however, they are good indicators of problems with absenteeism.

Summary

The rates of absence are decreasing slowly in each sector, following a trend over the past few year, however, the costs are increasing year on year. Few employers consider the real cost of absenteeism, with less than 20% considering the direct cost of administration or even of the impact on performance.

Stress is the seen as one of the top two major causes of short term absence, and the number one cause of long term absence in non manual workers

The survey concludes that organisations, and their management, need to focus on these issues and maintaining the reduction in overall absence rates, in addition to putting in place measures to ease the return to work of employees who have been absent for a period of time.

© 2008 stress and culture audits.