Business 'underestimating absence costs'

May 20 2003 by Brian Amble Print This Article

The cost of sickness absence could be as much as £34 billion – three times the latest figures quoted by the Confederation of British Industry, says Mercer Human Resource Consulting.

According to the CBI, the annual cost of sickness absence per employee is now £476. But this only takes account of salaries and temporary staff cover and ignores the cost of both lost time and investment in corporate healthcare measures.

"For a true reflection of the costs involved, companies should also consider lost productivity, lost sales opportunities and reduced product or service quality," said Christine Owen, Head of Health Management Consulting at Mercer.

She added: "Total costs could equate to up to 18 per cent of payroll, and even more in the public sector where absence levels are higher.

"Even organisations that invest heavily in healthcare benefits have high costs of sickness absence. Faced with this situation, many will remove benefits rather than investigate why the measures fail to deliver. But this can be a disaster as the problem increases and the mechanisms are no longer in place to deal with it."

"To obtain the full picture, organisations need to begin by sizing up the problem. This means not only establishing the cause, frequency and cost of sickness absence but also auditing such data as medical insurance claims, employers' liability cases and lost business opportunities," said Owen.

"The next step is to understand the cost of implementing current sickness absence measures such as occupational health, private medical insurance and employee assistance programmes. This will help determine whether the organisation is getting a good yield on its investment in these areas."

The CBI’s annual absence survey published earlier this month shows absence falling most significantly in firms where senior managers are responsible for absence management, something that Christine Owen echoed.

"Managers have a significant role to play as the corporate custodians of people performance," she said. "Responsibility to address attendance management by implementing appropriate policies and procedures, managing performance and accessing suitable and timely clinical advice and interventions."

Health solutions such as pre-employment screening, health assessments, case management and access to care and rehabilitation are another major way to address the issue.

"These elements form an organisation’s healthcare supply chain, which is only as effective as the weakest link," Owen explained. "Companies that ensure the chain is well connected reap the most benefits from their healthcare investment.

"Perhaps one of the most important elements in absence and health management is the implementation of cultural solutions," she added.

"This is about understanding how culture relates to the problem of lost time and how an organisation can change employees’ behaviour. It means looking at the impact of existing processes, policies, system and environments, and then reviewing them to encourage positive behaviour.

"For some organisations, culture undermines the efforts to reduce staff absenteeism while in others it is key to its reduction. Companies cannot effectively manage attendance unless they know the true causes, and whether employees tell the truth is dependent on what the organisation does with the information.

"Challenging reasons for absence will only foster negative responses - dealing rapidly and positively with the information is far more effective for both parties."