Companies still struggle to measure the cost of absenteeism

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65 percent of HR professionals want absentee information in real time, according to a new report from MidlandHR.

The talent management company surveyed over 120 HR professionals across organisations in the private sector, public sector and not-for-profit sector to identify attitudes towards absence management and reporting, finding that 65 percent of professionals said absenteeism is managed through combined efforts between HR and line managers – while 85 percent rely on reports to assist with communicating about the state of absence.

Richard Thomas, Director at MidlandHR, said:

“Clearly, businesses are still struggling. This latest research highlights a real lack of consistency in measuring and reporting absenteeism. Therefore, the way businesses measure absence needs to improve and the only way this can truly occur is by improving the entire absence management process.

“Of course, modern HR systems have a role to play in providing more sophisticated and intelligently presented absence information. But this is only one part of the story. Management teams need to be able to draw meaningful insights from these reports so that they can improve their processes, management styles, employee engagement, productivity and, crucially, the bottom line.”

This is typically where sophisticated HR technology systems are powerful. They enable HR and management teams to capture and store information about absenteeism in real-time in one central location. This enables quicker, more accurate and insightful management decision making to occur.

Further, when placing these statistics alongside the cost of absenteeism to UK businesses, and the current trend towards flexible working, it stands to reason that better reporting could help businesses improve absenteeism management. They’d be able to work out causes of absenteeism, identify anomalies and plan resources more efficiently.

Absenteeism costs almost £30bn annually

The financial cost of absenteeism to the UK market is approximately £30bn a year (PWC), which equates to around seven days lost per person every year (CIPD). There are many reasons for absenteeism, but these days it is commonly accepted by professionals that a contributor to absenteeism can be down to the poor implementation of  – or no – flexible working practice, which can often result in increased levels of short-term absence.

The true reason for absence could be down to a number of variables, including personal errands, childcare and disenchantment with the working environment (colleagues, tasks, management). The key here, regardless of the reason, is for organisations to get a grip on the state of absenteeism across their business. This includes measuring and reporting on a range of factors, such as dates, length of time, employees’ role and line manager, and so on.

Flexible working can reduce absenteeism by 38 percent

In contrast, if flexible working is successfully implemented it can help reduce absenteeism. In June 2014 the UK government announced flexible working rights. It believes flexible working will encourage a 38 percent drop in absenteeism and benefit UK business to a value of £55.8 million, outweighing the current high cost of absenteeism. So, as businesses develop strategies to deal with absenteeism, through flexible working, reporting capabilities must improve in order to help HR teams manage this trend.

Confusion over the cost of absenteeism

MidlandHR’s survey also identified that organisations vary in how they define the cost of absence to the business. 56 percent refer to the employee’s salary including allowances, benefits and on-costs such as employers NI, pensions and overtime that has been incurred; 41 percent use a combination of salary plus allowances, benefits and on-costs, such as employer’s NI and pensions; and 3 percent base the cost on the employee’s salary alone.

Therefore, organisations – that invest in how they measure the cost of absence to the business – will be able to identify where problems are occurring; what the cost to the business is; forecast and plan for potential problems and ultimately develop strategies and initiatives that enable them to manage these challenges and reduce the negative financial consequences for the business.

The Understanding Absence Management report can be downloaded here.

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