Employee Absences Have Consequences for Productivity and Revenue, SHRM Research Shows

Tracking, managing costs associated with employee paid time off can positively impact business bottom line

Dec 15, 2014
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ALEXANDRIA, Va. — A day off from work is anything but a free day. Absences carry hidden costs that can affect an organization’s productivity and revenue, a new survey from the Society for Human Resource Management (SHRM) found.

Employee absences have a moderate to large impact on productivity and revenue, according to 75 percent of respondents to the Total Financial Impact of Employee Absences Survey.

The survey, which was conducted in collaboration with and commissioned by Kronos Incorporated, found that the direct cost of paid time off for full-time employees in 2013 — accounting for wages, overtime and replacement workers — was equivalent to 15.4 percent of payroll. When indirect costs such as lost productivity were added, the total cost of paid time off was between 20.9 percent and 22.1 percent of payroll, with unplanned absences having the highest overall cost.

“These results show that tracking paid time off is important not only for ensuring that employees are treated consistently but also for controlling costs related to paid absences,” said Evren Esen, SHRM’s director of survey programs.

Supervisors spent an average of 4.2 hours a week — or 5.3 weeks a year — dealing with absences, including finding replacements, adjusting workflow and providing training, the survey showed.

On average, supervisors were perceived to be 15.7 percent less productive and co-workers 29.5 percent less productive when providing coverage for a typical absence day.

“There is an impact when co-workers are absent,” Esen said. “Understanding the drivers of absenteeism and addressing them immediately can influence strategies for improving productivity, as well as minimize the burden on co-workers and supervisors impacted by employee absences.”

The highest average loss in productivity, 36.6 percent, was the result of replacement workers being used to cover for an unplanned absence, making this type of absence the greatest cause for concern in controlling costs.

“Absences have real consequences,” Esen said. “Most obvious is that they add to the workload of others. But survey respondents also said they increase stress, disrupt the work of others and lower morale.”

Seventy-two percent of respondents said they noticed more unplanned absences on Mondays and Fridays and before holidays, sporting events and national events.

“The impact on employee morale is one of the most underappreciated costs of employee absences,” Esen said. “Absenteeism is a key driver of inadequate staffing and may increase employee stress levels. Poor management of employee absences can lead to a vicious cycle of rising stress levels that negatively affect employee health and morale and lead to even more days of missed work.”

Most organizations use technology to track employee time and absences, with 35 percent of organizations using an integrated system as a component or module of an HR information system and 29 percent using automated third-party software. But 15 percent of organizations reported using manual processes.

The survey also showed:

  • Overtime was used to cover 47 percent of employee absences.
  • More than one-quarter (27 percent) of respondents familiar with the annual cost of administering Family and Medical Leave Act (FMLA) leave reported it being between $10,000 and $19,999. Of all respondents, 34 percent indicated that they did not know the expense of administering FMLA leave.
  • About three-fifths to two-thirds of organizations (58 percent to 71 percent, depending upon the employee type) have formal, written attendance policies.
  • Two-thirds (66 percent) of respondents said their employees request time off by using a form or sending an email.

Conducted in April and May 2014, the survey polled SHRM members and Kronos customers and prospective customers.

An executive summary of the U.S. results is available on SHRM.org:
http://www.shrm.org/Research/SurveyFindings/Documents/Kronos_US_Executive_Summary_Final.pdf

The full survey report, which also includes data on practices in China, Australia, Europe, India and Mexico, is available at http://www.shrm.org/Research/SurveyFindings/Articles/Pages/SHRM-Kronos-Report-Total-Financial-Impact-of-Employee-Absences.aspx.

Media: A representative of SHRM’s Survey Research Center is available to answer your questions about the survey. For interview requests, please contact Kate Kennedy of SHRM Media Relations at 703-535-6260 and Kate.kennedy@shrm.org or Vanessa Gray at 703-535-6072 and Vanessa.gray@shrm.org.

Follow the Research Department on Twitter @SHRM_Research.

About the Society for Human Resource Management

Founded in 1948, the Society for Human Resource Management (SHRM) is the world’s largest HR membership organization devoted to human resource management. Representing more than 275,000 members in over 160 countries, the Society is the leading provider of resources to serve the needs of HR professionals and advance the professional practice of human resource management. SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China, India and United Arab Emirates. Visit SHRM Online at www.shrm.org and follow us on Twitter @SHRMPress.

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