HR Management & Compliance

Absence Policies and Leave Administration Lacking Rigor and Framework, Study Says

The widespread use of manual and improvised procedures to measure, mitigate and administer employee absence suggests that many employers are taking substantial compliance risks with regard to the Family and Medical Leave Act, according to the ADP Research Institute study, Total Absence Management: Two Decades After the Passage of FMLA.

Even though lost productivity due to unplanned absence is a primary business concern, only one-third of midsized companies (50 to 999 employees) and two-thirds of large companies (1,000-plus employees) are evaluating the impact of absenteeism on productivity, the ADP report noted.  In addition, no plans to develop strategies to mitigate the incidence of unplanned absence are underway, according to 503 HR and benefits decision makers who responded to the survey.

“Unplanned absence can be highly stressful and demoralizing for coworkers,” said ADP Vice President of Benefits Outsourcing Christopher Ryan. “A large portion of employers report that absenteeism is a problem … and more than half agree that [absenteeism] has had a negative impact on productivity.”

About six out of 10 midsized and large employers reported in the ADP survey that they track absences, ensure compliance and apply internal plans and policy provisions using only internal procedures and workflows. The remaining 40 percent said they use sophisticated automation and third-party vendors.

The average annual rate of absenteeism is 3.2 percent for midsized employers and 3.5 percent for large employers, according to the survey.

The study indicates that midsized employers may be reporting an overall lower absence rate because they are more likely to have less rigorous tools to measure absenteeism, and may be more informal regarding policy enforcement.

Although a 3.5-percent annual absenteeism rate may seem small, the indirect costs associated with planned and unplanned leave can be quite substantial. The Survey on the Total Financial Impact of Employee Absences (Mercer/Kronos, 2010) suggests that indirect costs are roughly two to four times absence-related direct payroll costs.

Total Absence Management

Total absence management, or TAM, is an emerging discipline that cuts across a wide range of human capital issues: productivity, employee relations, health and wellness, performance management, diversity, and work/life balance. Implementing an effective TAM strategy requires integration of leave administration through coordinated interfaces with payroll, time and labor, health and welfare, and HR analytics systems.

The ADP survey results show that many companies lack the integrated human capital management infrastructure and budget to outsource TAM administration, Ryan said during last week’s HR.com webcast, “Top Concerns around Absence Management and Why Employers Fail to Measure and Mitigate Absenteeism.”

The ADP Research Institute study also found that large companies are much more likely than midsized companies to:

  • evaluate their organization’s percentage of employee absences versus the industry average or other employers in the geographic area;
  • apply punitive discipline for excessive absenteeism;
  • analyze reasons for absences;
  • target intervention strategies and identify opportunities to offer additional health-and-wellness benefits; and
  • indicate that their wellness programs have significantly reduced absenteeism.

Two-thirds of decision makers in large companies are extremely, very or somewhat concerned with absenteeism, compared with two out of five decision makers in midsized companies.

Employee healthcare-related issues are the top reason for absences and account for about half of all employee absences in both midsized and large companies. This finding is consistent with multiple studies including surveys by WorldatWork, the Society for Human Resource Management, and Mercer.

Employee dependent’s health-related issues account for about 25 percent of absences and non-healthcare-related issues are the cause of the remaining 25 percent.

ADP survey participants clearly indicated that the frequency of absence occurrence and unplanned, intermittent absence due to unplanned illness and sick leave are the aspects of absence that worry them the most.

“Intermittent employee absences are harder to anticipate and plan for than extended leaves, and more likely to cause operational disruption,” Ryan said, citing the ADP research.

Is Compliance a Major Issue for Most Employers?

The ADP TAM survey indicates that compliance assistance is a critical consideration for employers. While some employers elect to consider outsourcing the administration of their leave programs only after experiencing an adverse FMLA complaint, it may be wise to consider being proactive and decide whether your organization is ready for a TAM assessment.

Thompson’s FMLA Compliance Plus is a decision tree application designed to help customers decide whether an employee is eligible for FMLA leave. For more on family leave compliance, see http://hr.complianceexpert.com.