How Can Employers Limit the Cost of Absenteeism? An International Look

Unscheduled staff absence due to illness or other reasons can be very costly for employers, official statistics and survey data reveal. In the UK it was reported by the Health and Safety Commission that 36 million days of work were lost due to sickness absence in 2006 and 2007, and the Chartered Institute of Personnel and Development (CIPD) estimated the annual cost of sickness absence to UK employers to be £659 per employee. An earlier study by the Institute of Employment Studies (2001) had put the potential costs much higher at between 2% and 16% of the total salary bill, or up to £2,271 per employee. This study found that employers significantly underestimated the costs to their organizations of unplanned absenteeism.

In the United States, the 2007 Mercer National Survey of Employer-Sponsored Health Plans, which covered 455 employers, found that the equivalent of around 9% of total salary costs were incurred due to unplanned absence. However, the costs of unplanned absenteeism in the U.S. vary considerably between different types of organizations, being much higher in the U.S. public sector than in the private sector, for example, due to a higher rate of sickness absence among government employees. Illness is by no means the only reason for unplanned absence – the CCH Inc. 2000 Unscheduled Absence Survey found that sickness absence accounts for only around 40% of all unscheduled absenteeism, followed by family factors which account for 21% and “personal needs” accounting for 20%. However, there is international evidence of a worrying increase in sickness absence, especially long-term absence, which is related to stress and other mental health problems. In the UK, a study by the Sainsbury Centre for Mental Health puts the total cost to UK employers of sickness absence due to mental health problems at £8.4 billion, with an average of 21 days leave being taken by each employee suffering from mental health-related sickness.

International Trends

Overall patterns of sickness absence are quite similar between different countries, being higher among women than men and among older rather than younger employees. However, there are also considerable variations in overall levels of sickness absence between countries, which may be attributable in part to legislation regarding sick pay benefits. In many countries, employers are required to provide employees with a minimum number of paid sick leave days per year, and there is some evidence that levels of absence are higher where benefits are generous, as in Sweden. On the other hand, other countries such as France also have good sick pay benefit systems but considerably lower rates of absence, so the relationship is not a straightforward one.

The United States is quite unusual among developed countries in that employers are not generally required by law to make sickness absence payments, and it has been reported that many workers, especially in lower-paid and part-time jobs, have no provision at all for paid sick leave. Moreover, there has been a recent trend for employers who previously paid employees for sick leave to reduce the maximum number of days payable, or to replace paid sick leave with “time off” programs, in which each employee can take a specified maximum number of days off in a year for the purpose of vacation, sickness or other reasons. A countervailing recent trend, however, is for state and city governments to introduce paid sick leave legislation to protect workers. Some argue that the costs of paying sick leave benefits if required to do so by law will just encourage employers to compensate by cutting back on salaries and other employee benefits.

Absenteeism vs. Presenteeism

However, there are some hidden costs of not providing paid sick leave. For one thing, there are likely to be reduced productivity costs associated with sick employees attending work rather than losing pay, a phenomenon sometimes referred to as “presenteeism,” not to mention the knock-on costs of reduced productivity or absenteeism among coworkers if contagious illnesses are involved.

Employers can take steps to reduce the overall costs of sickness absence and other forms of unplanned absenteeism by proactively looking after the health of their employees and providing employment conditions which facilitate a healthy work-life balance. For example, they might introduce health screening programs for employees, ensure that working conditions do not contribute to stress or mental health problems or introduce working time arrangements which help for employees to combine their work and family responsibilities. Studies have provided considerable evidence that preventative measures like these can have a significant impact on reducing unscheduled absences.

References

Anonymous (2001). Absence makes the business run slower. The Journal of Business Strategy 22, 1, p.3.

Anonymous (2008). Leave Benefits in the United States. Medical Benefits 25, 17, p.3-4.

Barmby, T., Ercolani, M. & Treble, J.G. (2002). Sickness Absence: An International Comparison. Economic Journal, 112, pp. F315-F331.

Bevan, S. & Hayday, S (2001). Costing Sickness Absence in the UK. Institute for Employment Studies report 382.

CCH Inc. (2002). 2002 CCH Unscheduled Absence Survey. Available from http://www.cch.com/press/news/2002/20021016h.asp.

Chartered Institute of Personnel & Development (2008) Annual Report 2008: Absence Management. Retrieved from http://www.cipd.co.uk/NR/rdonlyres/6D0CC654-1622-4445-8178-4A5E071B63EF/0/absencemanagementsurveyreport2008.pdf.

Dewis, P. & Bevan, S. (2002). Counting the Cost. Occupational Health. 54, 11; pp. 21-23.

Health and Safety Commission (2007). HSC/E publishes Health and Safety Statistics for 2006/07. Retrieved from http://www.hse.gov.uk/press/2007/c07020.htm.

Mercer (2008). 2007 National Survey of Employer-Sponsored Health Plans. Available from http://www.mercer.com/ushealthplansurvey.

Parsonage, M. & Grove, B. (2007). What are the costs of mental ill health at work? What can we do about them? The Sainsbury Centre for Mental Health. Retrieved from http://www.publicmentalhealth.org/Documents/749/Bob%20Grove.pdf.

Tanner, L. (2004). Paid time off offers greater flexibility. Dallas Business Journal. 28, 4, p. 29.

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