SnowdropKCS HR and Payroll Solutions, over 30 years' experience in the HR and Payroll industry

How to…manage employee absence

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The cost of sickness absence

The DWP's (Department of Work and Pensions) Health and Wellbeing at Work Report found large employers reported a higher incidence of sickness absence than small and medium employers. With this said it is estimated that the cost of staff sickness to UK small businesses could be £3.4 billion with a collective loss of 63 million days lost through sickness. It is also estimated that sickness rates are 27% higher in winter. Any reduction through better management can significantly improve productivity and profit levels. Cost reductions can come from reducing unworked time, overtime, temporary staff, and improving productivity and administration.

A CIPD survey of 573 organisations from across the UK identified that fewer than half employers monitor the cost of absence. Even for those organisations who do monitor absence there is still more that can be done to decrease absence levels and promote the health and well-being of the UK workforce.

Faced with budget cuts organisations change and with increased workloads, ensuring line managers have the skills required to manage absence and to provide the appropriate support to employees is vital.

Average sickness in 2010 (CIPD) 7.4 days per employee

Average cost of sickness per employee per year (CIPD) £692 (£93.51 per day)

Monitoring the cost of absence is a crucial step in reducing absence rates, especially in times of tight cost control.

Measure and monitor

There are a number of key areas that you will need to focus on if you want to reduce absence levels and increase productivity. It is useful to identify if your attendance management processes are effective by answering the following questions:

  • Does your organisation monitor absence levels?
  • Can absence levels be measured and trends spotted?
  • Are organisational absence targets set and benchmarked each year?
  • Do you know the sickness absence rate for your organisation for the last 12 months?
  • Are the levels of absence in excess of the CIPD average of 7.4 days per employee?
  • Do you feel your current processes and procedures are effective?

If you answer no to any of the above questions you may want to look at the benefits of implementing some of the following measures if you haven't already.

  • A clear absence policy stating measures to act as trigger points when absence levels reach a point when they need to be investigated. The policy should explain the rights and obligations of employees when absent due to sickness and the interventions and disciplinary procedures for unacceptable attendance levels.
  • An effective sickness absence monitoring process to identify trends and explore underlying causes of sickness.
  • Compare / benchmark sickness levels and set a target for reducing sickness levels.
  • Review the benefits of trigger systems such as Bradford Factor Points or rolling absence years.
  • Include line managers in the absence management process.
  • Invest in accessing Occupational Health professionals.

Reducing absence levels using specialist HR software

To ensure that productivity levels are maximised it is crucial to look at reducing unplanned absences to ensure that in-house resources are fully utilised. Many companies are seeing the benefits of investing in technology to boost their human resources performance. Implementing an HR software system can help employers use their resources more efficiently whilst also providing reports and management information to identify and deal with individuals / teams where the levels of absence are of concern.

HR Information Systems will not only provide detailed reports, they can be used to spot trends, automate absence administration and help to ensure that processes and procedures are adhered to. High levels of absence can put increasing pressure on productivity, staff morale and temporary recruitment costs. HR and payroll software systems that can streamline these processes and help identify areas of concern and the costs attributable to absenteeism are essential.

Communication and procedure adherence with employees can be improved with self-service and workflow systems which enable staff and managers to access personal HR data and manage much of the transactional absence process electronically.

While technology is not a replacement for effective HR and payroll policies and processes, it can be a powerful tool in enabling HR and payroll professionals to boost their company’s performance and productivity. With the right software systems HR and payroll professionals can be freed from much of the administrative burden of their role and be in a stronger position to make a more strategic contribution to business goals.

As well as helping to streamline processes, software tools that are likely to add the greatest value are those that help HR demonstrate improved staff performance and bring in greater efficiencies across the business.

Overcoming Common Challenges

Challenge: How can I reduce operational and overhead costs associated with absence management?

Solution:
HR systems can help to streamline HR and payroll administration by removing the transactional elements to internal systems and processes such as:

  • Automating absence reports via a workflow tool alerting HR and line managers to areas within the business that have unusually high absence or turnover rates so that problems can be addressed and costs reduced. This automation will remove the requirement to manually check individual incidences of sickness by emailing individual managers when employees have reached a trigger point.

Outcome:
Less time spent on checking and sending emails, reminders and information to line managers and employees.


Challenge: How do I identify if absence levels are higher than average?

Solution:
Calculate the average number of absence days per employee and compare to the CIPD average. To calculate the average number of sickness absence days use the following calculation:

Total number of sickness absence days (12 months period)
Average total number of staff
  • If the average number of sickness absence days is more than 7.4 days per employee this would indicate higher than average sickness levels.

Outcome:
You will be able to identify if there is a potential problem that you need to address or that the measures you have in place are working.


Challenge: Certain departments appear to have higher levels of sickness absence than others what can I do?

Solution:
Identify and compare the rates of absence between departments. This can be achieved by producing and monitoring reports obtained from you HR system to compare absence levels between departments.

Once a "problem area" is identified the information can be reviewed to identify any employees that are on long term sick or persistent repeat short term absences. These can then be addressed through your sickness absence policies and procedures.

Outcome:
By monitoring and addressing problems sickness absence levels should reduce and productivity increase.


Challenge: How can I demonstrate that investing in a new HR system will increase productivity?

Solution:
Reducing the average days of sickness per employee can make a large quantifiable difference as per the example below:

Reducing Sickness Levels / Improving Productivity

Based on 500 Employees Lost Opportunity Cost Lost Opportunity Saving
500 x 7.4 days = 3,700 actual lost days per year £345,987.00 -
Investment of time to reduce absence levels to 6.0 days per year per employee (3,000) – 500 staff *6.0 days = 3,000 lost days per year £280,530.00 £65,457.00
  Plus additional 700 productivity days

Outcome:
In this example by reducing the number of sickness absence days per employee by just 1.4 days per year has generated an additional 700 productivity days (equivalent to 2.7 FTE).


Challenge: My organisation seems to be undergoing constant change how can a software solution help me?

Solution:
Software solutions will create a framework for successful people management and enable HR professional’s to make a more strategic contribution towards business goals by:

  • Providing data and information to identify trends (such as reasons for leaving, turnover statistics, absence statistics and salary information) to help inform decisions and changes.
  • Choosing the right software solution for your business is crucial. A good system will grow with your organisation and be flexible enough to change to meet your new requirements.

Key Software Functionality

Ensure that your chosen system will efficiently help you to report on and manage sickness levels by making sure:

  • People management processes are steamlined providing all of the comprehensive information that is required.
  • Reports can be automatically run (including Bradford Factor) and distributed to the appropriate managers and staff.
  • Allow individual absence levels to be reported on so that trends and potential problems can be identified.
  • Comparative departmental reports can be produced to identify problems in particular departments.
  • Managers are given the tools to manage their staff more effectively.

About Us

Sage is a leader in business software and services. Our products are designed to dramatically reduce the complexity and administrative load on HR and payroll professionals. An automated system frees up more time and allows HR and payroll staff to focus on areas that really make a difference to the business and contribute towards the achievement of strategic business objectives.

Additional Information:

Lost time rate:
This measure expresses the percentage of total time available which has been lost due to absence, and can be calculated separately for different departments to identify areas of concern.

( Total absence (hours or days) in the period ) * 100  
Possible total (hours or days) in the period

Frequency rate:
This measure shows the average number of absences per employee as a percentage. It gives no indication of the length of each absence period or any indication of employees who take more than one spell of absence.

( Number of spells of absence in the period ) * 100  
Number of employees

Bradford factor:
By measuring the number of spells of absence the Bradford Factor identifies persistent short-term absence for individuals. It is calculated using the formula:

S * S * D

S = number of spells of absence in 52 weeks taken by an individual
D = number of days of absence in 52 weeks taken by that individual

For example:

10 one-day absences: 10 * 10 * 10 = 1,000
1 ten day absence: 1 * 1 * 10 = 10
5 two-day absences: 5 * 5 * 10 = 250

Companies usually set various triggers that can be linked to the disciplinary process for example 216 points could instigate a disciplinary review at first written warning level.

Refer to ACAS for disciplinary policy and procedure details: www.acas.org.uk

*undertaken in 2010 by the CIPD