Do You Know How Much an Employee Absence Costs?

Before tackling the problem of absenteeism, it is first necessary to measure its extent. Here are some keys to calculating the actual costs related to the absence of an employee.

 Only 36% of companies kept track of their employees’ absences, as can be read in a recent report from Morneau Shepell on absenteeism. This is very little, when you consider all the benefits of putting some numbers on the situation.

First of all, being fully aware of the problem is a good way to convince yourself to take action! Indeed, what organization would accept wasting the equivalent of 5% of its payroll (the estimated loss in private enterprise, according to Morneau Shepell) without flinching? The urgency to take action is felt quickly.

It’s by measuring the problem that it can then be resolved. This is what Kristen Coady explains on the HR firm’s website: “You may not be able to identify people who need support in the form of early intervention or prevention. How do you identify them if you do not have in place a monitoring and management strategy for absences?” To ask the question is to answer it.

Getting the full picture

So, how do you calculate the cost of absenteeism?

The “easy” part of the calculation is the direct costs: the salary of the absent employee, the overtime hours paid to employees called to make up time, as well as the insurance premiums and costs related to absences for long or short-term disability, and the resulting administrative costs.

Then the indirect costs must be taken into account, which are sometimes overlooked. These losses are less obvious at first glance, and above all they tend to fluctuate from one industry to another.

Here we are talking about the costs of replacing labour (recruitment, training and integration of a new employee), management costs (the work done by managers to compensate for absences), reduced productivity (tasks postponed due to an absence) and penalties related to delivery of service which is below expectations and agreements agreed with customers.

Finally, a “psychological” cost can be added, which reflects the reduced morale of the troops.

Hard to take stock when poorly equipped

This calculation, it must be understood, is not simple. That’s why the authors of the Morneau Shepell report caution companies of the risk of using “outdated technology and systems” for management of absences. “The task is simply too arduous,” they argue.

Their solution is “Using technology flexibly” and, if applicable, “outsourcing parts of your solutions to obtain the latest functionality at an affordable price.”

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