Is absence costing your company a secret small fortune?

Absence management is increasingly in the public eye due to the previously unknown build-up of costs associated with employee absence. However, the CIPD survey 2012 reports that there are still less than half of employers in the UK, measuring absence. This figure has barely changed since 2009 and we’d like to help the UK move with the times.

The CIPD’s 2012 survey reviewed 667 organisation with a total of 1.7 million employees. Of these companies the following startling facts were revealed.

• The average cost of absence per employee, per year is £600. When the average absence length per employee is 5.5 days per year, creating a loss of 2.6% in working time, the costs stack up astonishingly (see table on pg15 of the CIPD survey for UK area & sector variations).

These figures vary per sector due to Occupational sick pay entitlements and what each company includes in their cost of absence – despite this, the public & not-for profit sector came out on top with much higher average costs than the private sector. The survey concludes that this variation is down to the public sectors higher tendency to pay sick pay. ¾ of the public sector respondents provide full pay for up to 20 weeks. This is a huge chunk of the cost of absence.

In total 81% of employers provide Occupational Sick Pay so to avoid money pit falls your company must provide these benefits correctly. As an example, the CEBR (Centre for Economics & Business Research) reported that long term sickness is costing the UK’s private sector more than the entire Government’s annual rail budget – surely we can do better than this?

• This huge individual cost per employee is combining to create a £6.5bn a year loss for the UK, with £3.1bn of that accounting for the private sector alone.

Although the survey provides helpful tables of national averages, the variations make it difficult to see how absence really affects your company’s purse. It is vital to measure your own company instead of relying on averages, and it is much easier than you think.

First you must identify your company’s absence trends. The survey provides tables showing the top causes of both short term & long term absences in the UK for all sectors and labour type. The top short term absence cause is Minor illnesses such as colds, flus and headaches and the top long term absence cause is now Stress. The majority of these absence causes can be combated with easy to implement absence management strategies with Occupation Health provisions.

To estimate the cost of absence in your organisation, the questions to answer include;

How much does the following cost your organisation, per employee?

– Occupational sick pay

– Salary/payment of replacement staff

– Recruitment and training of replacement staff

– Loss in productivity

– Loss in custom/ customer reputation

– Absence management procedures e.g. man hours for welfare calls, paper work & return to work interviews.

The list of costs can sometimes be endless, but once you know the answers to these, you are well on your way to saving your organisation money and creating a basic picture of your company. In this climate, paying £600 per employee, per year, for something so avoidable is simply un-imaginable.

The DWP (Department of Work & Pensions) has a downloadable excel spreadsheet to calculate the cost of ill health on your organisation.

Also, for free advice on how to decipher your company’s absence levels, the CIPD provides an online tool to measure your companies absence levels, and explains how to measure the time lost. From there, the costs can then be pieced together.

However, let Honeydew do all the hard work for you as we are currently offering a free diagnostic to all our Linkedin group members and newsletter subscribers! So, to sit back and wait for Honeydew to figure out the cost and scope of your absence problem, join one (or both) of the groups above & get in contact with us.

Lastly, if you are still shocked at the financial price of occupational sick pay, Gov.co.uk provide advice on how much sick pay your employees are entitled to and how much you can/ should offer. See how your company fits in.