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Survey says unscheduled absence costs employers 8.7 percent of payroll

Unplanned, or unscheduled, absence costs employers 8.7 percent of payroll, more than half the 13.6 percent of payroll cost of health care in 2009, according to the Survey on the Total Financial Impact of Employee Absence, conducted by Mercer on behalf of Kronos Incorporated, a provider of labor analytics applications, including absence tracking. The total costs, direct and indirect, of all major absence categories average 35 percent of base payroll, ranging from 29 percent for exempt employees, 36 percent for nonexempt salaried, 39 percent for nonunion hourly workers, and 38 percent for union hourly. These differences among worker classes are due to the differences in earnings levels, with the exempt salaried as the highest earners and nonunion hourly the lowest.

Incidental unplanned absences (those of five days or fewer) also cause the highest net loss of productivity per day (that is, work that is missed or postponed because it is not performed by others): 19 percent versus 13 percent for scheduled absences and 16 percent for extended absences (due to leave or disability). Days lost per employee per year due to incidental unplanned absences averaged 5.4 days, and varied, across all employee classes, from 3.9 days for exempt employees, 4.9 for nonexempt salaried, 5.8 for nonunion hourly, and 7.3 for union hourly.

“Senior leadership within most organizations is often not aware of the full cost of employee absence,” commented Michele Deziel, Kronos senior director, core product line. Employee absence “is seen as un-measurable or dismissed as negligible. While most other expenses for an organization are closely monitored, employee absence is loosely tracked, and the tracking is not thorough enough to reveal the full costs. What this survey shows is that employers can control labor costs and increase productivity by better tracking and controlling their absence-related expenses and minimizing unplanned absences.”

“Employers tend to focus their energies on controlling healthcare costs, since the dollars are more easily measured, and they are rightly concerned about what health care reform will do to their budgets,” added Michael Klachefsky, Mercer principal and absence management practice leader. This survey confirms previous survey conclusions that “large opportunities exist for cost reductions and increased productivity if employers also pay more attention to tracking and managing absences.”

The survey was conducted online in the spring of 2010. A total of 276 organizations responded from all major industry segments, sizes, and regions throughout the U.S.