button Vol. 7
No. 4


Impact of Mobilization
line Absenteeism & The Bottom Line
line Feingold FMLA Amendment
line 50 Tips On Workplace Violence
line FLSA Update
line Shorts

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News on Personnel, Labor Relations and Benefits

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Human Resources and labor relations Absenteeism And The Bottom Line

Checkmark Graphic Introduction

Latest survey results highlight absenteeism issues.

The issue of absenteeism and unscheduled leave has always been of importance to businesses interested in their bottom line.

Recently there has been more awareness of the costs of absenteeism and employers are beginning to assess its true impact on every aspect of their business. As they do a better job of tracking absenteeism employers are beginning to realize how much they are actually spending on it, and are often surprised at the actual figures when they are all added up.

One of the factors in the issue of absenteeism that has triggered a lot of press lately is the release of the "2003 CCH Unscheduled Absence Survey".

The results of the survey, which was conducted June 16, 2003 through July 9, 2003, appear in the October 22, 2003, issue of CCH Human Resources Management Ideas & Trends, a newsletter for HR professionals.

Subsequently many articles have followed presenting the results of this survey and its possible meaning for employers nationwide.

In this article we will quote some of the findings from this important survey, but will round out the issue with a wide variety of information on the deeper causes and possible solutions to this problem.

While scheduled time off for employee vacations is an inevitable cost of doing business, costs related to unscheduled absences can be reduced through wellness programs, disability management and flexible time-off options. Employers can't escape the salary costs of time off the job, but when they plan ahead they can often eliminate indirect costs such as hiring a temp, paying someone else to work overtime or lost productivity.

The results of the CCH survey point to lower absenteeism rates recently, and lower costs per employee because of this drop. On the surface this appears to be good news.

However, we will explore some of the deeper issues surrounding these figures and point out how the figures on a superficial level don't tell the whole story. This is not meant to be a negative thing, but as a spur to the astute employer to try to understand the situation in a more detailed manner, and make better judgments in the long run because of this.

As an example of how the figures may not be what they seem, it is probable that the current economy may be among the factors in the overall reduced rate and cost of absenteeism.

"Employees may be more fearful of taking off time given the tight job market," said CCH workplace analyst Lori Rosen, JD. "It's also worth noting that costs are down significantly, which is in part a result of the fact that employers have been aggressive over the past year at finding different ways to control wages. For example, many employees who are now coming back into the workforce are doing so at a lower salary."

Among the results of the survey is the fact that while more companies are tracking their costs, 83 percent of companies surveyed by CCH believe that unscheduled absenteeism is likely to stay the same or get worse in the next two years.

And significantly, the study finds that regardless of the absence-management programs available costs won't go down until employers make greater efforts to manage their impact, which they don't appear to be doing.

In some ways absenteeism may be an indicator of a whole array of related factors that are crucial to making today's workplace more productive. It may be viewed as an important element in motivating the improvement of working conditions for employees and the bottom line for employers.

Checkmark Graphic Facts and Figures

- 2003 CCH Unscheduled Absence
- Business Insurance, July 2000
- U.S. Bureau of Labor Statistics

  • In 2003 the absenteeism rate declined to 1.9 percent, down from 2.1 percent in 2002, and 2.2 percent in 2001.

  • In 2003 the average annual per-employee cost of absenteeism dropped to $645 from $789 in 2002, $755 in 2001, and $610 in 2000.

  • Nearly two-thirds (64 percent) of unscheduled absences are due to Family Issues (22 percent), Personal Needs (18 percent), Entitlement Mentality (13 percent) and Stress (11 percent).

  • In 2003 full-time employees were offered the same number of sick days as in 2002, but took fewer of them. On average, companies granted 7.6 sick days to employees in 2003 and employees used 5.6 days, down from 6.2 days taken in 2002.

  • In 2003 an average of 48 percent of employees took zero to two paid unscheduled absence days (up from 42 percent in 2002). Also, 40 percent used three to eight days and 12 percent took nine or more days.

  • Extended hours employees account for 17.6 percent of the U.S. workforce, but 41 percent of the total U.S. cost of absenteeism.

  • In a survey of eleven U.S.-based telecommunications organizations, 72 cents of every dollar of costs related to employee absence stems from lost productivity, rather than hard costs, such as health care and disability benefits.
    (Business Insurance, July 2000)

  • Of all the expenses related to absence, unscheduled time off has the biggest impact on productivity, profitability and morale. Companies lose approximately 2.8 million workdays each year because of employee injuries and illnesses, according to the U.S. Bureau of Labor Statistics.
    (Reported 09/03)

Checkmark Graphic Factors in Absenteeism

     - Morale: A Direct Correlation

At Braun Consulting Group we attempt to understand the issues at each workplace associated with Morale.

For purposes of this article "Morale" is defined as "the pervasive emotional or mental condition of employees with respect to cheerfulness, confidence, zeal, etc. in their relationship with their employer and their work".

Regarding absenteeism, there is evidence that there is a direct correlation between the morale of a workforce and the degree of absenteeism present.

Though this is common sense, it is borne out in some recent surveys.

Measuring morale has always been a difficult issue because the costs associated with poor morale are not hard costs, and are often hard to track and quantify. But in the case of unscheduled absenteeism the costs can be more clearly defined.

According to the latest 2003 CCH survey employers overall set aside an average of 4.4 percent of their budgets for absenteeism. However, when morale is factored in the results vary significantly.

The surveyors found that organizations with Poor to Fair morale set aside 5.3 percent of their budgets to cover the costs of absent workers compared to 3.7 percent in organizations with Good to Very Good morale.

That's a difference of almost 1.5%... and that can amount to a significant amount of money.

Morale also influences the reasons people call in sick at the last minute.

Organizations reporting Poor to Fair morale were more likely to experience unscheduled absenteeism due to Stress (14 percent) and Entitlement Mentality (16 percent) than organizations reporting morale as Good to Very Good (9 and 11 percent, respectively).

The effects of low morale are reflected across the board in the CCH survey. For example, while only 20 percent of organizations reporting Good to Very Good morale believe that unscheduled absenteeism is a serious problem for them, 41 percent of organizations reporting low morale find it a serious issue.

It is clear that absenteeism is linked to morale. So employers attempting to deal with the costs and issues of absenteeism to their organizations have an area that they can approach head on that will directly influence the bottom line results - employee morale issues.

     - Work Schedule Flexibility

One of the factors that cropped up in the CCH survey is the fact that employers' commitment to work-life programs may be tapering off just as companies are starting to see the long-term payoff in reduced absenteeism and associated costs.

In past years, employers have introduced greater flexibility into the workplace with an array of work-life programs - employer-sponsored benefit programs or initiatives to help employees balance the dual demands of their professional and personal lives.

Some experts feel that there is a good likelihood that the fact that the last four years has seen an absenteeism rate hovering around 2 percent is in part because employers are now realizing results from the absence control and work-life programs they put in place over the last several years.

The programs found to rank highest in curbing unscheduled absences are these:

    1. Alternative Work Arrangements
    2. Compressed Work Week
    3. Job Sharing, and
    4. Telecommuting

These programs all provide employees with greater control over when and where they work.

While Alternative Work Arrangements showed a 6-percent increase in use over 2002, the other programs experienced declines in use by organizations: Compressed Work Week, down 18 percent; Job Sharing, down 19 percent; and Telecommuting, down 4 percent.

Many indicators point to the fact that policies that address employees' needs can benefit employers in the long run by raising morale and decreasing unscheduled absences.

If there is not a consistent commitment to empowering employees and raising employee morale the backlash will most likely be increased costs due to higher rates of unscheduled absenteeism.

Lets hope that the declining absenteeism rates that we are currently seeing are not sabotaged by reactions of some employers who react by pulling the very programs that may have brought those rates down to begin with.

Employers with an eye to long-term results will always be the ones who are careful to not make short-term decisions based upon the latest numbers. The correlation of flexibility in the workplace to absenteeism rates is one that astute employers will keep watching closely.

     - Presenteeism: Another Face Of The Problem

An interesting aspect of the absenteeism issue is something known as "Presenteeism".

Presenteeism is a term used by human resource professionals to describe circumstances in which employees come to work even though they are ill, posing potential problems of contagion and lower productivity.

When employees go to work sick they risk infecting their co-workers and will most likely not be as effective or productive in their work. The drag on the bottom line and overall productivity of the workplace can be subtle and hard to track effectively, but has now been acknowledged as a legitimate factor in assessing costs relating to morale and absenteeism.

More employers and HR professionals are now realizing that "presenteeism" is another face to the issue of absenteeism that is a very important one, and one that has been largely ignored until now. The CCH survey found that nearly half of the employers surveyed this year felt that presenteeism was a problem in their organizations.

It may seem contradictory at first to find a negative spin on an increased number of employees being at work and having less scheduled absenteeism, but a closer look at this situation reveals that presenteeism is actually the result of lower morale and more pressure on workers. The cost is not directly in lost workdays, but indirectly in paying for more inefficient workdays and a potential for exponential multiplication of this cost by greater numbers of employees being affected by ill health and lost productivity.

Strangely, it seems that workers at companies with low morale are more likely to show up for work sick, according to the CCH survey. Employers with low morale reported that 33 percent of unscheduled absences were due to Personal Illness, compared to 39 percent at companies with Good to Very Good morale.

And yet again the study found that morale had an impact: Despite higher rates of unscheduled absenteeism overall, companies with low morale have more ill workers showing up for work. Both higher rates of unscheduled absenteeism, and higher rates of sick workers at work are the result of poor morale at the jobsite.

In fact, 52 percent of organizations with Poor to Fair morale reported presenteeism was a problem, while just 38 percent of organizations reporting Good to Very Good morale saw presenteeism as an issue.

Lower morale and more pressure to be at work seem to result in sick people being at work, and others taking unscheduled leave for personal reasons.

     - Stress: The "Stress Cost Formula"

One source that studied stress and the workplace calculates that stress is linked to nearly 20 percent of absenteeism costs.

The latest CCH study puts the numbers of absenteeism due to stress as 11 percent of all unscheduled leave taken according to their respondents.

So, depending on your sources stress can account for anywhere from 10 to 20 percent or more of absenteeism costs.

Stress is difficult to measure, especially in terms of economic impact. However, this "stress cost formula" that we are reporting in this segment gives us an idea of the results found by one source that studied this issue extensively.

In March of 2003 an article by Ravi Tangri, who is CEO and CCO of Chrysalis Performance Strategies, presented this "Stress Costs Formula" to measure the cost of stress on organizations and individuals.

According to Mr. Tangri, the formula was derived from a comprehensive study of all the available research available on the effects of stress, basing the percentages on the suspected impact stress has on each of those factors. He states that it only includes calculations with solid research findings behind them and, when several figures are available, it usually includes the low end of the range (to be conservative).

To calculate what stress costs your organization, plug in your own numbers. Use a one-year period for all numbers, and include everyone in the organization.

Calculate using the following numbers:

    * 19 per cent of absenteeism costs
    (salary and benefit costs for days absent plus any additional expenses)

    * 40 per cent of total turnover costs

    * 55 per cent of employee-assistance programs
    (consult your provider for a more accurate number-it may be higher)

    * 30 per cent of short- and long-term disability costs

    * 10 per cent of drug-plan costs to cover psychotherapeutic drug costs

    * 60 per cent of the total cost of workplace accidents

    * The total cost of workers' compensation claims and lawsuits due to stress

This is the cost to your organization due to the effects of stress in the workplace.

To calculate the cost of absenteeism for an individual employee, add up the total salary and benefit costs of the days that employee missed in the last year.

For the total cost of absenteeism, add up these numbers for all employees, along with any other costs, such as overtime required to fill their positions.

Multiply the total for all employees by 19 per cent and that's the minimum cost of absenteeism due to stress.

These calculations provide a conservative estimate of what stress costs your organization.

There is no solid research giving accurate costs for the following factors, so the formula excludes them:

    * Productivity lost while employees are at work but distracted by stress;
    * Violence in the workplace including bullying, sexual harassment
       and ethnic or racial harassment;
    * Disability and drug plan costs due to illnesses caused by stress.

In this article we don't have the answers about how to lower stress in the workplace, but only want to call attention to how significant the factor of stress is in relation to absenteeism.

Ignoring stress in the workplace and its effects on your bottom line will cost you money, and one of the ways the impact of stress can be seen is in the rate of absenteeism.

An important way to combat absenteeism is to work with programs and ideas that reduce stress in the workplace. There are no easy answers, but the effort will be worth it when you run the numbers and see the bottom line impact of stress on your jobsite.

     - Shift Work

Circadian Technologies Inc. (http://www.circadian.com) released a study this year that reports the unintended and largely unrecognized costs associated with irregular schedules, night shifts and extended hours.

They report that these factors are eroding the profits of American businesses by $206 billion annually, or approximately $8,600 per extended hours employee.

Around 24 million Americans, half of whom are in professional or white-collar occupations, work irregular schedules, night shifts or extended hours positions.

Extended hours employees only account for 17.6 percent of the U.S. workforce, but a whopping 41 percent of the total U.S. cost of absenteeism.

This is clearly a significant number, and indicates a serious problem.

"Difficult economic times have resulted in understaffed and inefficiently staffed conditions in many extended hours facilities. This, in turn, leads to excess and imbalanced overtime, high absenteeism and turnover rates, increased costs of recruitment, and excessive employee health and accident costs," said Circadian's Alex Kerin, Ph.D., a report co-author.

The costs and risks of extended hours operations generally are unrecognized, the report states, because most employee data is not segmented by shift and because senior executives are generally not present when the majority of problems related to extended hours operations occur.

According to the Circadian study some of the essential costs and risks preventing U.S. companies from achieving the full potential benefits of extended hours operations are:

    * Lost productivity - Measured as output per employee hour, productivity is 5 percent lower between the hours of midnight and 7:00 a.m. than during the day.

    * Absenteeism - Average absenteeism among companies with extended hours operations is more than twice the national average, at 4.9 percent versus 2.1 percent.

    * Turnover - Average turnover is nearly three times higher among extended hours workers, with a turnover rate of 9 percent in 2002 compared with a national average of 3.4 percent.

    * Health care costs - Employees staffing extended hours operations suffer from significantly higher rates of obesity, gastrointestinal disorders, cancer, sleep disorders, and fatigue-related car accidents.

Shift Work and Absenteeism Case Study

Another related study by Circadian Technologies involved the following scenario:

The company in this case study employed a five-day (Monday to Friday), three-crew schedule. Following an upturn in business, in which the production capacity of five days was exceeded, the company asked workers to work on the weekends. As demand increased even more, the company split each of its day, evening, and night shifts into two sub crews. One sub crew worked both days one weekend and the other crew worked the next weekend, allowing for 50 percent capacity for Saturday and Sunday. This resulted in employees working twelve straight days once a month. Overtime costs were high and the demand continued to increase to the point that 100 percent capacity was required at all times.

However, even with the seven-day schedule, productivity levels were low due to the high level of absenteeism. Weekend absenteeism was especially high, as some employees rejected the extra scheduled hours and refused to come to work. Other employees, taking advantage of double-time pay on Sundays, worked every Sunday and then called in absent for one day during the week. Employees realized they could receive the same compensation per week for fewer hours. From the employer's perspective, the five-day schedule with "bolt-on" overtime for the weekends limited the ability to maximize weekend capacity and also decreased efficiency during the week.

To resolve the situation, the company decided to move to a true 24/7 schedule that was selected by the employees. More employees were hired to ensure 100 percent coverage, resulting in decreased overtime. Absenteeism dropped dramatically and the plant reached 100 percent capacity and met demand.
(See http://www.circadian.com/clients/absent.html)

Checkmark Graphic Solutions and Ideas

Here are some tips on how to manage unscheduled absenteeism abuse cases:

  • Promote a high performance work culture and emphasize the importance of the employee fitting into this culture

  • Provide flexible work practices that meet the needs of your business and your employees

  • Introduce a reward system for any improvement to sick leave rates

  • Try to eliminate or decrease "boring" or repetitive jobs

  • Widen job responsibilities

  • Increase promotional opportunities

  • Recognize and reward your employees' contribution

  • Improve the skills of supervisors

  • Provide training and development

  • Work with employees to develop strategies to reduce absenteeism

  • Implement preventative occupational health and safety strategies in order to minimize worker's compensation absence

  • Monitor annual leave and long service leave data to ensure your employees are taking adequate recreational breaks.

  • Recognize a problem developing and intervene early before it escalates.

  • Talk to employees who are abusing leave and see if their behavior stems from a personal problem. Help them referrals if this is the case.

  • Learn to say "no." Don't let employees get away with abusing leave policies. If you hear a ridiculous request to misuse leave, politely decline.

If you need help in improving your bottom line by taking on the issue of unscheduled absenteeism in your workplace, just contact us here at Braun Consulting Group and see how we can help.

Check back with us on our website in the future, and we will keep you up to date on any developments that might occur relating to unscheduled absenteeism and its impact on the workplace.

Feingold FMLA Amendment Next Page

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