Absence from work costs business millions and presenteeism isn't far behind

What are the reasons for absences in your business? Are people taking lots of short absences from work - a day here, a day there? And what is the cost to your company?

Many organisations are surprised when they learn the total cost of absence can be in the tens of millions of dollars.

“This has a profound impact on your workforce participation rates, and ultimately the productivity and profitability of the organisation,” says Morag Fitzsimons, Employee Care Expert, Lockton.

When we think of absences from work the default is employee illness or injury, but this is only part of the picture.

The cost of worker’s compensation premiums are now often less than 10% of the total cost of absence for any given organisation.

While labour turnover makes up the biggest cost, nearly 20% of the cost of absence is due to presenteeism. An employee who’s there in body but not in spirit.

Presenteeism is a concept often discussed but which is hard to quantify in organisations, says Fitzsimons. Lockton’s new report Waking up to Absence, points to research showing employees are fully engaged in their work for three hours per day, which leaves a lot of time where employees are focussed on things other than their work.

What’s going on?

Fitzsimons says there are many things that may be happening to make an employee feel detached from their job. They may be feeling unwell but don’t feel they can afford to take time off, or they may be physically well but overwhelmed with work and stressed; or they may be unhappy in their role or have personal issues diverting attention away from work.

“There was a study from Medibank several years ago that indicated for every sick day taken from work, there were around three days of presenteeism,” says Fitzsimons.

In one respect, the pandemic has changed expectations that, even if you are feeling unwell, you should ‘soldier on’ and come into work, nonetheless. But on the flipside, now you have people working from home who, although they are sick, keep working.

The current staff shortages are also having an impact as the workload is falling on to other people. In health care and hospitality where there are chronic shortages of staff, the pressure to turn up is immense.

“These areas can be a tipping point into workers’ compensation. By not addressing it at the front end, staff absences may become a bigger problem later on. Presenteeism not only impacts on productivity of a workforce, but may also contribute to increased accidents and injuries if not paying attention to the work at hand. Addressing presenteeism needs to be part of a people risk management strategy,” says Fitzsimons.

While most organisations will have a handle on their staff turnover rates and many are genuinely trying to instigate wellbeing strategies for their staff, there isn’t an understanding of where to target it.

“It’s about looking at all of their data through a total lens rather than a segmented lens and seeing what patterns are driving absence in the business and then targeting ways to get the best ROI from your wellbeing strategies,” says Fitzsimons.

The report also takes a hard look at unpaid leave which is often dismissed when considering the cost of absence. “While unpaid leave has no direct cost, there is lost value in the time that would have been available and now needs to be replaced, either by casuals or overtime. This number is reflective of the costs that would have, or may have, been paid if a replacement staff member was sourced,” it says.

The true impact of extended leave without pay can be quantified in several ways, for example:

•  The impact on productivity when staff have injuries or illness that cannot be resolved within normal statutory leave periods.
•  The additional physical and psychological load on remaining employees who may be required to take on additional work of others during an extended absence period.

Not paying for extended leave for one individual may have far wider reaching consequences for the other employees and business productivity overall.

In one real-life example of an ASX-listed company, in a single year, 65,000 hours in personal leave was taken and 25,000 hours of unpaid leave or the equivalent of 15 full-time employees each month. Nearly 300% of unpaid leave was for two days or more.

Yet all is not lost. Absenteeism and presenteeism can be managed much better than it is in many companies. Top tips include:

1. Identify ways to allow increased reporting of issues which impact presenteeism without making employees feel vulnerable or judged. Issues such as pain and discomfort, personal issues or work overload – can be ameliorated by special leave provision or revised deadlines that may prevent longer term absence.
2. Staff turnover sometimes occurs because people are not aware that other opportunities exist in the business. Improve engagement strategies and be transparent about openings and career progression.
3.  Managing work related injuries. Employees contacted within three days of injury were 26% more likely to return from a physical injury and 45% more likely to return from a psychological injury. Keep in close contact.