Managing the Cost of Absenteeism

When it comes down to it, there are many costs that are directly associated with absenteeism. Many reasons for employees being absent, such as poor weather or traffic conditions, may seem innocent and justified. However, they can still have a major impact on your bottom line, and as a business owner, it’s important to know the causes and solutions to absenteeism.  

Types of Absenteeism

There are three different types of absenteeism that have an impact on any company: scheduled, unscheduled, and partial shift. Scheduled absences consist of vacation or personal time, such as PTO, unscheduled absences include sick days, disability, and Worker’s Compensation leave, while partial shift absences are when a worker arrives late at work, takes longer breaks than allowed, or leaves early. Employers expect their employees to miss a certain number of days every year - after all, it’s inevitable - but that is why most places have an allotted amount of PTO and sick days available. When employees start taking advantage of those unscheduled and partial shift absences, it can decrease productivity and eventually have an effect on your business’ finances.

Unscheduled absenteeism can cost businesses up to $3,600 per year for each hourly worker and $2,650 for each salaried employee. Despite the large costs of absenteeism, some employers don’t measure its impact on a regular basis. As a matter of fact, only 36% of 1,200 employers measure the impact of absenteeism on their bottom line. Employers should be aware of how often their employees are absent from work without a valid reason so they can better manage its effect on their business. To do this, you must first understand the intricacies that may cause an employee to be absent.

The Cost of Absenteeism

As we discussed above, when employees are absent from work it has an effect on the company’s productivity and, in the long run, its finances. Studies show that the cost associated with absenteeism varies by industry, with the greatest loss being in professional occupations. Forbes shared a table that shows the annual cost of lost productivity due to absenteeism and it is shocking.

 
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According to the table, the annual cost of lost productivity due to absenteeism in professional occupations (excluding nurses, physicians, and teachers) is around $24.2 billion, while for farmers and fishers in only $0.16.

The costs associated with absenteeism can be direct or indirect. The direct financial cost comes from replacement of workers, wages for unreported PTO, overtime pay for employees who get scheduled when others don’t show up, and from lack of productivity when no replacement is found. The indirect costs include poor quality of products or services, low productivity, stress by other employees who need to overwork, safety issues due to employees who are poorly trained to cover for those who don’t show up, higher turnover, etc.

Reducing Costs by Tracking Absences

In order to reduce the excess costs associated with absenteeism, employers must first reduce the rate of absenteeism. While employers cannot completely eliminate absenteeism, they can control it by tracking their employees’ hours. Employers should have a system for managers and employees to see how much PTO they have used and how many hours they have left. An online, cloud-based solution such as Dominion’s Time & Attendance software is perfect for tracking absences. Our time card authorization screen alerts managers and supervisors of abnormal punches such as clocking in late, leaving early, or no punches on scheduled days.

Our software also has a “Points and Incidents” feature that automatically assigns point when employees have irregular punches. Once a threshold is reached, it alerts the manager or supervisor that they need to address the employee’s behavior. This will help ensure that employees don’t abuse their PTO, sick days, or number of approved absences. By tracking absences, managers will be able to see which employees are taking too much time off and they will notice certain patterns that will help them address the problem in a more effective way. Studies show that by implementing technology into tracking absences, cost savings can be found in areas such as the following:

Reduced Payroll Expense

Attendance trackers provide more accurate reports, patterns, and root causes for managers. They also reduce instances where PTO is not reported and they are able to reduce overtime costs. Some attendance tracking software are able to select employees to cover shifts based on their training, availability, and hours worked during the week. Studies have shown that companies that use specialized software to track their employees’ hours have lower rates of absenteeism.

Increased Productivity

By tracking absences, managers are able to forecast and make better schedules, resulting in more motivated and productive employees. Tracking employees hours also ensures that overtime limits are not surpassed, reducing burnout and improving productivity.

Although there are many other ways to control and reduce absenteeism, having a cloud-based attendance tracker is the best way to start. Want to find out what Dominion’s Time & Attendance Software can do for you? Click below.