Save money while improving employee morale

by Richard Reinhardt

Unscheduled absenteeism costs American businesses billions of dollars every year, according to the U.S. Bureau of Labor Statistics (BLS). There are myriad potential costs to take into account, including: 

• Overtime;
• Paid sick days;
• Use of temporary or “relief/reserve” employees;
• Reduced productivity;
• Poor quality of goods or services resulting from replacement workers’ inexperience or fatigue;
• Administrative costs associated with absenteeism;
• Time spent finding suitable replacements; and
• Discipline and safety problems due to inadequately trained replacements.

Another cost employers must be aware of is the negative attitude that reliable employees can develop toward the company. These employees become tired of doing someone else’s work and wonder why management doesn’t address the problem properly. If you have one or more employees with attendance issues, you need to solve the problem for financial and employee morale reasons.

Do the math
To begin solving the problem, you have to develop reliable metrics, including having the ability to measure your absentee rate. This is as simple as adding the number of employees absent during a particular time period (perhaps one month) and dividing it by the average number of workers employed during that period. The national average absentee rate is about 2.5% for salaried and hourly employees in all industries. Companies should calculate absentee rates to work toward a goal of reducing absenteeism.

Here’s an example to illustrate the costs of absenteeism: If a company with 200 employees has a 2.5% absentee rate, that means five people are absent each day (2.5% x 200 = 5). If each of the five absent employees earns $15 an hour for an eight-hour workday, the total cost is $600 (5 x $15 x 8 = $600) per day. If there are 22 workdays in a month, the total cost to replace or maintain additional staff to fill the void would be $13,200, not including fringe benefits. If the 2.5% absenteeism rate continued for 12 months, the annual cost would be $158,400. That doesn’t include any potential overtime or administrative costs.

What to include in your policies
No one solution can reduce excessive absenteeism. Solving the problem can involve improving your company’s employment practices, changing your company culture, updating your compensation plan, or providing better supervision. However, the quickest and most effective way to reduce employee absences, tardiness, or early departure is through attendance policies that address unscheduled absences. For example, a policy covering nonexempt employee absences should include the following key points:

• If they’re able to, employees should personally call in as soon as possible to report the absence.
• Absent employees should call in each day they are absent unless other arrangements have been approved in advance by the supervisor.
• A clear definition of “lateness” or “leaving early” should be established. Most of our clients define lateness as arriving anytime after the starting time. There is no grace period; late is late.
• A list of excused absences should be provided — for example, bereavement leave, Family and Medical Leave Act (FMLA) leave, jury duty, and leave due to a work-related accident. You may add reasons that fit the company culture or can be easily documented. Sickness is usually excluded from the list of excused absences.
• The total number of unexcused absences that equates to excessiveness needs to be clearly defined. An example might be two unexcused absences within a four-month period. Any absences exceeding two would result in progressive discipline that ultimately leads to termination.

A clear policy lets employees know exactly what to expect. Your policy should allow for sickness, but not for too many sick days. (If the case is unusual, senior management or a peer panel should review it.) The end result is that each employee will be treated fairly and consistently, and the company will significantly reduce problems associated with excessive absenteeism, including its direct cost.

Richard Reinhardt is a management consultant with F&H Solutions Group. He specializes in helping clients create positive employee relations climates. You may contact him at rreinhardt@fhsolutionsgroup.com.