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The high cost of sick days.
Karen M. Kroll, CFO Magazine
February 15, 2006
It's no secret that employees call in sick when they feel fine, but just how often they fib might surprise you. A 2005 survey by CCH Inc., a Riverwoods, Ill.-based provider of information services, found that personal illness accounts for just 35 percent of unscheduled absences.
That doesn't mean workers are out shopping or hitting the ski slopes. They might be at home waiting for the plumber to show up or tending to their kids on a school snow day. Top reasons for taking what might be called nonsick days are family issues (21 percent), personal needs (18 percent), entitlement mentality (14 percent), and stress (12 percent). Lisa Franke, a workplace analyst at CCH, says that absences for stress and entitlement — taking days employees believe they have "earned" — are up slightly from last year because "leaner staffing levels have intensified workloads."
No matter the reason, absent workers are expensive. The CCH survey found that unscheduled absences cost companies $660 per employee per year, up from $610 in 2004, in salary costs alone — never mind the expense of paying for overtime or a temporary replacement. "If someone doesn't show up, there's a domino effect," says Franke, who points out that there is also a cost in work not getting done. Sean Nicholson, assistant professor of policy analysis and management at Cornell University, says that when companies assess the expense of absenteeism only in terms of salary, they underestimate the true cost by about a third.
As a result, employers are trying new strategies to make sure unscheduled absences are reserved for genuine illness. Two tools that executives in the CCH survey ranked most effective in controlling absences are paid-leave banks and buyback programs. With a paid-leave bank, employers combine different categories of time off, such as vacation, personal, and sick days, into one pool. (Employees who have more-serious health concerns typically tap into short- or long-term disability programs.) Employees decide how to use the time. "It gives more flexibility and encourages scheduled versus unscheduled absences," says Franke.
At Sungard SCT, a Malvern, Pa.-based software-development firm, a culture of flexibility and a paid-leave program help keep unscheduled absences to a minimum, says CFO David D. Gathman. The expectation is that employees who need to go to a doctor or a child's school play will still get their work done.
Sungard doesn't benchmark its rate of absenteeism against other firms, Gathman says, but it does track the "utilization rates" of its professional-services employees. Sungard beats the industry average by several percentage points, he says. "In an organization that has more than $100 million in professional services, that's a significant positive variance," he says.
Other strategies to lower absenteeism include allowing workers to telecommute, providing a flu-shot program, and instituting a policy that permits parents to duck out for school functions and the like for a few hours rather than call in sick for the entire day. Employers that offer buyback programs agree to purchase some or all of employees' unused sick time at the end of the year, giving workers a financial incentive to use sick days judiciously.
Of course, employers should be careful not to make their absenteeism programs work so well that they encourage employees to come to work even when they're sick. This phenomenon, known as "presenteeism," is leading many employers to remind workers that if they are sick, they should stay home.