Absenteeism is the term generally used to refer to unscheduled employee absences from the workplace. Many causes of absenteeism are legitimate—personal illness or family issues, for example—but absenteeism can also be traced to factors such as a poor work environment or workers who lack commitment to their jobs. If such absences become excessive, they can adversely impact the operations and, ultimately, the profitability of a business.
COSTS OF ABSENTEEISM
Unscheduled absences are costly to business. According to the U.S. Department of Labor, companies lose approximately 2.8 million workdays a year because of employee injuries and illnesses. The inability to plan for these unexpected absences means that companies hire last minute temporary workers, or pay overtime to their regular workers, to cover labor shortfalls; they may also maintain a higher staffing level regularly in anticipation of absences. According to Matt Lewis, in an article entitled "Sickened by the Cost of Absenteeism," which appeared in Workforce in the fall of 2003, "Three to 6 percent of any given workforce is absent every day due to unscheduled issues or disability claims … To compensate, most companies continually overstaff by 10 to 20 percent to mask lost productivity. That's a colossal cost."
Small businesses are, of course, not immune to such "expenses." There are obvious costs associated with an absent employee, including consequences difficult to measure. The most obvious cost is in the area of sick leave benefits—provided that the business offers such benefits—but there are significant hidden costs as well. The SOHO Guidebook cites the following as notable hidden cost factors associated with absenteeism:
- Lost productivity of the absent employee
- Overtime for other employees to fill in
- Decreased overall productivity of those employees
- Costs incurred to secure temporary help
- Possible loss of business or dissatisfied customers
- Problems with employee morale
The costs associated with absenteeism can be controlled. While scheduled time off for vacations and illnesses is an inevitable cost of doing business, managing things in such a way as to discourage excessive absenteeism is well worth the effort.
DEVELOPING AN ABSENCE POLICY
Many small business owners do not establish absenteeism policies for their companies. Some owners have only a few employees, and do not feel that it is worth the trouble. Others operate businesses in which "sick pay" is not provided to employees. Workers in such firms thus have a significant incentive to show up for work; if they do not, their paycheck suffers. And others simply feel that absenteeism is not a significant problem; they see no need to institute new policies or make any changes to the few existing rules that might already be in place.
But many small business consultants counsel entrepreneurs and business owners to consider establishing formal written policies that mesh with state and federal laws. Written policies can give employers added legal protection from employees who have been fired or disciplined for excessive absenteeism provided that those policies explicitly state the allowable number of absences, the consequences of excessive absenteeism, and other relevant aspects of the policy. Moreover, noted The SOHO Guidebook, "a formal, detailed policy that addresses absences, tardiness, failure to call in, and leaving early can serve to prevent misconceptions about acceptable behavior, inconsistent discipline, complaints of favoritism, morale problems, and charges of illegal discrimination. General statements that excessive absenteeism will be a cause for discipline may be insufficient and may lead to problems."
Changes in company culture and policy have been cited as effective in reducing absenteeism. The use of flexible schedules, whenever possible, is one way to offer employees a means of managing their own personal time needs and thus reducing unscheduled absences. Many small businesses that have introduced flextime, compressed work weeks, job sharing, and telecommuting options to their workforce have seen absenteeism fall significantly; these policies provide employees with much greater leeway to strike a balance between office and home that works for them (and the employer).
Most employees are conscientious workers with good attendance records (or even if they are forced to miss significant amounts of work, the reasons are legitimate). However, it is estimated that as many as three of hundred workers are likely to exploit the system by taking more than the allotted sick time or more days than actually necessary.
To address absenteeism, then, many small businesses that employ workers have established one of two absenteeism policies. The first is a traditional absenteeism policy that distinguishes between excused and unexcused absences. Under such policies, employees are provided with a set number of sick days (also sometimes called "personal" days in recognition that employees occasionally need to take time off to attend to personal/family matters) and a set number of vacation days. Workers who are absent from work after exhausting their sick days are required to use vacation days under this system. Absences that take place after both sick and vacation days have been exhausted are subject to disciplinary action. The second policy alternative, commonly known as a "no-fault" system, permits each employee a specified number of absences annually (either days or "occurrences," in which multiple days of continuous absence are counted as a single occurrence); this policy does not consider the reason for the employee's absence. As with traditional absence policies, once the employee's days have been used up, he or she is subject to disciplinary action.
"Use It or Lose It"
Some companies do not allow employees to carry sick days over from year to year. The benefits and disadvantages of this policy continue to be debated in businesses across the country. Some analysts contend that most employees do not require large numbers of sick days and that systems that allow carryovers are more likely to be abused by poor employees than appropriately utilized by good employees, who, if struck down by a long-term illness, often have disability alternatives.
A friendly feature that can be added onto a "use it or lose it" sick day policy is the option of donating unused earned days to a leave bank for colleagues suffering from catastrophic illnesses. Although this may not be an incentive to all employees to conserve sick days, it does offer dedicated employees a means of putting what they may consider legitimately earned hours to a positive use.
ESTABLISHING A SYSTEM FOR TRACKING ABSENCES
Absenteeism policies are useless if the business does not also implement and maintain an effective system for tracking employee attendance. Some companies are able to track absenteeism through existing payroll systems, but for those who do not have this option, they need to make certain that they put together a system that can: 1) keep an accurate count of individual employee absences; 2) tabulate company wide absenteeism totals; 3) calculate the financial impact that these absences have on the business; 4) detect periods when absences are particularly high; and 5) differentiate between various types of absences.
see also Employee Motivation; Sick Leave and Personal Days
Allerton, Haidee E. "How To." Training and Development, August 2000.
Anderson, Tom "Employers Lax on Absence Management." Employee Benefit News, June 15, 2005.
Ceniceros, Roberto. "Written Policies Reduce Risk in Firing Workers Comp Abusers." Business Insurance. April 21, 1997.
"Don't Let Unscheduled Absences Wipe You Out." Workforce, June 2000.
Gale, Sarah Fister. "Sickened by the Cost of Absenteeism." Workforce, September 2003.
Hunt, David. "'There's a Bit of Flu Doing the Rounds, Boss,'" Employee Benefits, April 2000.
"Link Absenteeism and Benefits—And Help Cut Costs," HR Focus, April 2000.
The SOHO Guidebook. CCH Incorporated, 1997.
Hillstrom, Northern Lights
updated by Magee, ECDI
Illness imposes a number of costs on the individuals who suffer the illnesses, their families and loved ones, their coworkers, and, more broadly, society as a whole. When estimating the social costs of illness, both in general and with regard to specific diseases or unhealthy behaviors, health economists and others focus on two categories of costs: medical expenditures required to treat the conditions, referred to as direct costs; and productivity losses associated with the conditions, called indirect costs. Indirect costs, often the larger of the two burdens, consist of productivity lost due to the premature deaths of disease victims and to morbidity (sickness) and disability that cause victims to miss work days.
Absenteeism is the term used to describe the fact of an individual's missing his or her regular daily activity. For children and adolescents, absenteeism typically refers to school days missed. For adults, absenteeism generally refers to individuals' absence from their jobs. In analyses of the indirect costs of all illness, all days of absence from work attributable to sickness are included in calculating the absenteeism component of indirect cost. In analyses of the indirect costs of specific illnesses or unhealthful behaviors like cigarette smoking, the productivity loss of interest is that associated with excess absenteeism due to the disease or condition at issue. The essential word here is "excess." Nearly all workers experience some days of absenteeism during the course of the normal work year. However, workers who suffer from specific acute or chronic illnesses are likely to miss more work days than usual. It is these extra days of missed work that create the lost productivity calculated as an indirect cost of specific illnesses.
The costs associated with absenteeism are estimated by multiplying the number of days of absenteeism by the best measure of workers' contribution to productivity: their daily wage rate. In the case of conditions that are distributed among the population reasonably independent of people's age and occupational status, an average wage rate for the population as a whole may be applied. In the case of many illnesses, however, the distribution of the conditions is not independent of age and occupation. In these instances, analysts attempt to associate age-and occupation-specific wage rates with the days of work missed due to morbidity or disability. For example, were one interested in assessing the costs associated with back pain, one of the most common causes of work loss in America, one would emphasize wage rates paid to industrial and other blue-collar workers whose jobs require them to lift and move heavy objects. An analysis of the social costs of breast cancer, a disease that afflicts primarily women, would utilize wages earned by women in calculating the burden of absenteeism attributable to the disease.
Not all disease-related work loss occurs among paid workers. Conditions that afflict people caring for their children or cleaning their homes also impose costs on society. A complete estimate of the burden of disease must account for absenteeism in this sector of the society as well. Formal analyses often include unpaid work loss by multiplying days lost by what economists call a "shadow price," an estimate of the value of the unpaid labor performed. For example, unpaid child care may be valued at the wages of paid day-care providers. Similarly, housework time lost may be valued by the wage rate of paid domestic house cleaners.
Although there is no argument about whether absenteeism imposes a significant cost on members of society, economists and public health analysts frequently differ on whether they consider such absenteeism a social cost. To public health analysts, illness-and injury-related absenteeism represents a burden on society as a whole, a social cost of enormous proportions. In contrast, to economists such productivity losses represent primarily private costs borne directly by the sick and disabled workers and their families, not the broader society. How one classifies such costs is not merely an academic exercise. Certain public health policies, such as the taxation of cigarettes and alcoholic beverages, are based in part on determination of the social cost of the consumption of these products. If the cost to society is deemed large, a high tax may be warranted to signal smokers and drinkers that the implications of their behaviors burden the rest of society, not merely themselves.
However this argument is resolved, no one challenges the notion that illness-and behavior related absenteeism constitutes an important element of the burden of disease.
Kenneth E. Warner
(see also: Alcohol Use and Abuse; Child Care, Daycare )
Cook, P. J. (1991). "The Social Costs of Drinking." In The Negative Social Consequences of Alcohol Use. Oslo, Norway: Norwegian Ministry of Health and Social Affairs.
Deyo, R. A.; Cherkin, D.; Conrad, D.; and Volinn, E. (1991). "Cost, Controversy, Crisis: Low Back Pain and the Health of the Public." Annual Review of Public Health. 12:141–156.
Warner, K. E.; Chaloupka, F. J.; Cook, P. J.; Manning, W. G.; Newhouse, J. P.; Novotny, T. E.; Schelling, T. C.; and Townsend, J. (1995). "Criteria for Determining an Optimal Cigarette Tax: The Economist's Perspective." Tobacco Control 4:380–386.