With unmanaged employee absences costing companies up to 10% of payroll, according to some estimates, employers should pay close attention to the reasons behind absenteeism and whether they are linked to the organization’s culture of health, or lack thereof.

Figures from Aon Hewitt highlight that undermanaged employee absences can cost companies up to 7-10% of payroll, while the average disengaged worker can cost employers between $10,000 per year or up to $78,000 in legal fees for contentious Family and Medical Leave Act cases.

“What are the causes of work loss or performance loss?” is a question that all employers should be asking, says Kim Jinnett, Ph.D., executive vice president at the Integrated Benefits Institute. She adds employers need to consider “whether [the absence is] health-related or not, [and] better tie their investments in human capital to the operational level, as well as the health and benefit level.”

Also See: Absence management services can put hours back in clients' days

Unscheduled absences, whether short-term or long-term, have been shown to be costly. A recent IBI study highlights that managers are unlikely to take any action when the leave is between one and three days.

When an absence reaches two weeks is when managers most frequently assign work to other employees (58%), find substitute workers (18%) and use overtime (7%). After one month, managers tend to reassign work to other employees less frequently (49%) than at the two-week mark, yet increase their use of substitute workers (28%) and increase hiring of new employees (4%) to pick up the slack. But Jinnett explains that this inaction may prove to hurt employers.

“Any costs to the company of delays aren’t just borne by the company,” Jinnett says. “A lot of managers might assume that workers might be making the work up, depending on the job classification, but there’s just a lot of assumptions going on as opposed to actual hard measurement and understanding.”

Also See: A culture of health creates competitive advantage

Hard numbers relating to decreases in absences and turnover have been correlated to healthy workplaces. In Sibson Consulting’s Healthy Enterprise Study, employers that scored higher on its Healthy Enterprise Index – a measure of health plans, wellness practices, support structures and communications, time off and behavioral health – experienced 33% lower turnover and 36% fewer extended absences. Also, for companies in the top quartile of the index, workers’ compensation costs as a percentage of payroll decreased by 17% to 0.74%.  

There’s been a heightened awareness of absence management practices since the economic crisis of 2008, when many companies cut staff yet still expected the same output from remaining employees, says Steve Cyboran, a vice president and consulting actuary with Sibson Consulting. He adds that “organizational culture itself has a big impact on absences.”

“[Employers are] focusing on this notion of creating a health culture. Their primary focus is generally to create a sustainable health plan, to avoid the excise tax down the road for the Affordable Care Act,” he tells EBN. “But also those who are doing it right will also see a significant impact on their absences as well. Perhaps the biggest area they’ll see it is in unscheduled absences. Organizations that get smart about [creating healthy cultures] will be leading their industry in innovation, in productivity for employee and employee satisfaction, and profitability.”

Also See: Strong company health culture supports healthy workforce: survey

Cyboran adds that employers unable to adapt to changes related to absence management will fall behind more progressive organizations.

“If you don’t create this healthy culture, you are going to fall under the weight of costs associated with not being a healthier culture,” Cyboran says. “Your health care costs will be out of control, your workers’ comp costs will be out of control, [the] reliability of [your] workforce will be so unstable that I don’t think you will be able to operate efficiently enough.”

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