This Week's Herman Trend Alert

HR in Normal 2.0

  The Herman Trend Alert

May 18, 2011

Costly Unscheduled Absences will Accelerate

Unscheduled absences cost employers a lot of money. There are many causes for those absences, including the employees’ being ill themselves, needing to take care of a sick child or parent, or even their inability to face their commutes. According to Mercer and Kronos, these unscheduled absences (including extended absences) cost organizations about 9.2 percent of payroll each year.

In their recent study, titled “The Total Financial Impact of Employee Absences”, the two consulting firms outlined the direct and indirect costs involved. “Direct Costs” include the cost to pay the salary/wages or benefit provided to the absent employee, and “Indirect Costs”, include the costs of replacement labor expenses and “net lost productivity value”, Mercer’s way of saying “the cost of the productivity lost due to the absence”. Moreover, let us not forget the additional administrative costs to keep track of the additional absences. The total cost to employers is staggering. For an employer with 1,000 employees whose annual salaries average $50,000, 9.2 percent of payroll equals over $4,500,000 per year.

However, when we dig into other figures, there is much more information. According to a new survey commissioned by The Workforce Institute at Kronos Incorporated and conducted by Harris Interactice, more than 5 million employed American adults have called into work sick because they could not face their commute. From still another study we learn that the average elder caregiver costs his/her employer over $20,000 per year in unscheduled departures, not to mention the percentage of parents who are forced to stay home, due to their children’s illnesses.

We believe these high costs will accelerate, mostly due to the increasing problems that are the underlying causes, including lack of sick-child- and elder-care assistance, and the inability of employees to telecommute. Finally, there are the general (increasing) stress levels on today’s workers who have been stretched thin for years. After thoroughly examining companies’ policies and procedures, Mercer suggests tackling the underlying issues. We believe their process is backwards. Wise employers will address these critical issues right away, but unfortunately, many others will wait until their costs are even higher than they are today.

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