The Costs of Absenteeism: What’s Killing Your Bottom Line?

There are going to be days where weather, traffic, or alarm clock mishaps cause your employees to be late to work. While these may be innocent and even justified reasons for absenteeism, few managers truly understand the effect it has on their company. Regardless of the reason for your employee’s unexcused absence, there are direct and indirect costs associated with the problem. 

The Direct Costs

The obvious cost of absenteeism on your company is actual dollars. Unscheduled absenteeism can conservatively cost $3,600 per hourly employee every year, and $2,650 per salaried employee every year. When we talk about absenteeism we are actually describing a conglomerate of absences. These include scheduled absences, unscheduled absences, and partial shift absences. While legitimate reasons for taking time off work such as scheduled vacation, sick days, maternity leave, and the like are completely acceptable, they still cause productivity disruption in the workplace. 

As for unexcused absences, companies can handle the problem in a variety of ways, which will vary on a case by case basis. In some situations, employees may simply not be replaced, which will result in cost productivity. In other cases, managers may maintain excess staff or hire from an agency to fill in for these gaps in work, or pay for overtime with existing staff. 

To paint a picture of what the total cost on your payroll would be due to absenteeism, consider the following scenario:

 A business consists of 90% hourly workers at an average of $10 an hour and 10% salary workers at an average $45,000 annually. With the combined totals of absences whether excused or unexcused, a 1,000 person business would lose $1,966,200 a year, which equals approximately 7.4% of payroll cost. 

The Indirect Costs

Alongside the direct monetary cost of absenteeism are the indirect costs. These are more “hidden” expenses including high turnover, poor production quality, and inability to meet customer demand, excess management time, and increased safety issues. 

Absenteeism may also reflect what your employees’ actual morale level is. Companies with high employee morale have an average of a 7.5% absentee rate, and a rate of 9.4% within facilities with poor or low morale.


The obvious solution to the problem of saving productivity, product quality, and money is for management to reduce absenteeism with workers as much as possible. So how can this be achieved in reality? The best solution is to have the ability to track absenteeism and thus be able to view the effect it has on your business. 

Having the software to capture actual employee time worked is essential to this process. Utilizing technology with time clocks will assist in this time capture greatly. Biometric time clocks work especially well with time capture because they eliminate any “buddy punching” or exaggerated time worked. Similarly, having an employee self service (ESS) platform that lets employees request paid, unpaid, or volunteer time off is a very useful in collecting reasons for absences. 

However your company chooses to track or discipline workers on the issue of absenteeism, it’s important that some sort of system is put in place. Choosing to ignore the issue will only hurt your profits and business as a whole, so find a solution that works for you.

For more information on implementing timekeeping software for your company, visit Dominion’s Time and Attendance page.

Source: The Workforce Institute