GOOD READS

The Causes And Costs Of Absenteeism

Absenteeism is an employee's intentional or habitual absence from work. While employers expect workers to miss a certain number of workdays each year, excessive absences can equate to decreased productivity and can have a major effect on company finances, morale and other factors. This article looks at the causes of absenteeism, the costs of lost productivity and what employers can do to reduce absenteeism rates in the workplace.

Causes of Absenteeism
People miss work for a variety of reasons, many of which are legitimate and others less so. Some of the common causes of absenteeism include (but are not limited to):

  • Burnout, stress and low morale - Heavy workloads, stressful meetings/presentations and feelings of being unappreciated can cause employees to avoid going into work. Personal stress (outside of work) can lead to absenteeism.
  • Childcare and eldercare - Employees may be forced to miss work in order to stay home and take care of a child/elder when normal arrangements have fallen through (for example, a sick caregiver or a snow day at school) or if a child/elder is sick.
  • Depression - According to the National Institute of Mental Health, the leading cause of absenteeism in the United States is depression. Depression can lead to substance abuse if people turn to drugs or alcohol to self-medicate their pain or anxiety.
  • Disengagement - Employees who are not committed to their jobs, coworkers and/or the company are more likely to miss work simply because they have no motivation to go.
  • Illness - Injuries, illness and medical appointments are the most commonly reported reasons for missing work (though not always the actual reason). Not surprisingly, each year during the cold and flu season, there is a dramatic spike in absenteeism rates for both full-time and part-time employees.
  • Injuries - Accidents can occur on the job or outside of work, resulting in absences. In addition to acute injuries, chronic injuries such as back and neck problems are a common cause of absenteeism.
  • Partial shifts - Arriving late, leaving early and taking longer breaks than allowed are considered forms of absenteeism and can affect productivity and workplace morale.

Costs of Lost Productivity
The Gallup-Healthways Well-Being Index surveyed 94,000 workers across 14 major occupations in the U.S. Of the 77% of workers who fit the survey's definition of having a chronic health condition (asthma, cancer, depression, diabetes, heart attack, high blood pressure, high cholesterol or obesity), the total annual costs related to lost productivity totaled $84 billion. According to the survey, the annual costs associated with absenteeism vary by industry, with the greatest loss occurring in professional occupations (excluding nurses, physicians and teachers); the 14 occupations and corresponding costs of lost productivity are shown in Figure 1.

Occupation Annual cost of lost productivity due to absenteeism (in billions)
Professional (excluding nurses, physicians and teachers) $24.2
Managers/executives $15.7
Service workers $8.5
Clerical/office $8.1
Sales $6.8
School teachers (K-12) $5.6
Nurses $3.6
Transportation $3.5
Manufacturing/production $2.8
Business owners $2.0
Installation/repair $1.5
Construction/mining $1.3
Physicians $0.25
Farmers/foresters/fishers $0.16
Figure 1: Annual cost of lost productivity by major U.S. occupations

According to Absenteeism: The Bottom-Line Killer, a publication of workforce solution company Circadian, unscheduled absenteeism costs roughly $3,600 per year for each hourly worker and $2,650 each year for salaried employees. The costs can be attributed to many factors including:
  • Wages paid to absent employees
  • High-cost replacement workers (overtime pay for other employees and/or temporary workers)
  • Administrative costs of managing absenteeism
Other indirect costs and effects of absenteeism include:
  • Poor quality of goods/services resulting from overtime fatigue or understaffing
  • Reduced productivity
  • Excess manager time (dealing with discipline and finding suitable employee replacements)
  • Safety issues (inadequately trained employees filling in for others, rushing to catch up after arriving as a replacement, etc)
  • Poor morale among employees who have to "fill in" or do extra work to cover absent coworkers
What Employers Can Do
Absenteeism is an especially difficult problem to tackle, because there are both legitimate and poor excuses for missing work - and it can be challenging for employers to effectively monitor, control and reduce absenteeism. Unless a company requires a written excuse from a doctor, for example, it can be difficult to determine if an employee is actually sick when missing work. At the same time, however, it is important for employers to consider the added costs associated with a sick employee who spreads an illness that gets the whole division - or a lot of customers - sick.

To address problems like this, some companies, cities and states have moved toward a mandatory paid sick leave policy, where each employee receives a specified number of days each year to use when sick.

Opponents of mandatory sick leave argue that it will ultimately cost businesses more money and lead to increased layoffs. In addition, opponents have concerns that employees will use all their sick days whether or not they need them. Advocates of such a move, however, argue that paid sick leave makes economic sense because it will help stop the spread of communicable diseases in the workplace and in schools - resulting in fewer instances of absenteeism in the long run - and that sick employees will be able to recover sooner.

The Centers for Disease Control, for example, states that paid sick leave could have an especially significant impact in the food service industry, where it estimate that sick food handlers are responsible for 53% of norovirus (a particularly nasty form of stomach virus) outbreaks. - One sick food handler could theoretically infect dozens or even hundreds of people, resulting in a large number of absences that could have been avoided if that employee had simply stayed home. Unfortunately, workers often either need the money or are worried about being terminated for calling in sick - even if it's unpaid leave - so they go to work even if they know they are contagious.

In an effort to reduce absenteeism, some companies offer incentives for going to work, such as earned time off or lotteries for workers who do not have any unexcused absences within a certain period. Other firms might try a more proactive approach, putting policies in place to focus on responses to employee health concerns, including:
  • Physical health
  • Psychological health
  • Work-home balance
  • Environmental health
  • Economic health
The logic with this approach is that healthier, happier employees will be more able and motivated to go to work each day, resulting in increased productivity and higher morale for the individual workers as well as the entire team. Although these employee wellness strategies may be expensive to implement and maintain, they can have a net positive effect on a company's bottom line - and that's good for business.

The Bottom Line
Absenteeism costs U.S. companies billions of dollars each year in lost productivity, wages, poor quality of goods/services and excess management time. In addition, the employees who do show up to work are often burdened with extra duties and responsibilities to fill in for absent employees, which can lead to feelings of frustration and a decline in morale.

Occasional absences from work are inevitable - people get sick or injured, have to take care of others, or need time during business hours to handle personal business. It is the habitual absences that are most challenging to employers, and that can have the greatest negative effect on coworkers. Because missed work days have a profound financial effect on a company's bottom line, it is beneficial for most businesses to implement strategies to equitably monitor, reduce and respond to absenteeism.



More From Investopedia

Quiz: How well do you know India's economy?

Question 1

Which of these products is India the world's largest producer of?

Poll Choice Options
  • Wheat
  • Rice
  • Milk
1
2
3
4
5
6
7
8
9
10

Latest News

  • White House considers former banking lawyer for Fed board - sources

    NEW YORK/WASHINGTON (Reuters) - A former lawyer with the American Bankers Association is being considered by the White House as a possible nominee to the board of the Federal Reserve, according to sources familiar with the efforts The lawyer's name emerged as the White House weighs candidates with community banking backgrounds to fill gaps on the Federal Reserve's powerful but depleted board, the sources said. People familiar with the White House's process said administration officials may …

  • Apple expands buybacks by $30 billion, OKs 7-for-1 stock split

    Apple Inc (AAPL.O) has approved another $30 billion in share buybacks till the end of 2015 and authorized a rarely seen seven-for-one stock split, addressing calls to share more of its cash hoard while broadening the stock's appeal to individual investors. Activist investor Carl Icahn, who had famously called on the iPhone maker to boost its buyback program, tweeted his approval of the move on Wednesday. On Wednesday, Apple reported sales of 43.7 million iPhones in the quarter ended March, …

  • Buffett: moving oil by rail safely major industry concern

    Warren Buffett, chairman of conglomerate Berkshire Hathaway (BRKa.N), said on Wednesday that safety is a major priority for the rail industry, after a recent spate of accidents raised concerns about how to transport oil safely. He added that the delay in the construction of the Keystone pipeline was unlikely to prompt additional purchases of tank cars at Berkshire railroad unit BNSF. Buffett also said, in an interview with CNBC the same day, that he thinks Coca-Cola's (KO.N) equity …

  • Asia markets: Tech sector brightens as Apple jumps 8 percent

    Asian markets could get a lift on Thursday after tech heavyweights Apple and Facebook beat Wall Street expectations, sending their stock up sharply and boosting Nasdaq futures. The Nasdaq futures were up 1 percent and the S&P 500 0.3 percent. Sentiment on the tech sector brightened after Apple (AAPL.O) decided to buy back $30 billion of its shares out to the end of 2015 and authorized a seven-for-one stock split. Apple reported sales of 43.7 million iPhones in the quarter ended March, far …

  • India may cede top rice exporter spot under Southeast Asian price onsl …

    India's rice exports could slide by nearly a quarter this year and knock the country off its perch as top exporter of the grain due to stiff competition from Southeast Asian rivals that have recently slashed prices, Indian industry executives said. A drop in Indian exports could help Thailand trim a record inventory chalked up under a controversial rice-buying scheme. Thailand may also be able to reclaim its status as the world's biggest rice exporter, which it lost to India two years ago. …

IN-DEPTH ANALYSIS & INTERVIEWS

  • This might well be India’s biggest Ponzi scam

    It was just too good to be true. Ashok Khital, 45, displays every symptom of a man who knows he's been conned. …

  • India's star studded football league

    High and mighty including Sachin, Salman & Sun Group buy ISL teams …

  • Leaderspeak with Rajesh Janey

    Rajesh Janey, President - India & SAARC, EMC shares many firsts in his life. …

  • Power Hungry

    Gujarat has power round-the-clock. Most other states do not. Why this will matter in the general elections. …

  • Etcetera

    The most keenly watched contest of the current general election will be the one for the Varanasi parliamentary seat, where the Bharatiya Janata Party's prime ministerial hopeful Narendra Modi squares off ... …

  • Economy vs Democracy

    As the country gets election fever, cash comes out of mattresses and turns into liquor, gifts, and food. But it is not bad for the health of the economy, reports Sarika Malhotra from the trenches. …

  • Bracing for Challenges

    Raghuram Rajan is preparing to deal with concerns that may arise when a new government takes charge. …

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    16.52-0.33-1.96%
    UNITECH.BO
    14.31-0.27-1.85%
    SUZLON.BO
    120.40+7.00+6.17%
    FRL.BO
    66.05+4.10+6.62%
    MANGCHEM.BO
    54.40+1.65+3.13%
    HCLINFO.BO
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
    16.20+2.70+20.00%
    JAGSONPH.BO
    53.50+8.90+19.96%
    RUSHIL.BO
    40.45+6.45+18.97%
    RCIIND.BO
    63.95+8.90+16.17%
    MRPL.BO
    24.00+3.10+14.83%
    NELCAST.BO
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    24.25-6.00-19.83%
    BMAL.BO
    13.26-2.24-14.45%
    ZYLOG.BO
    30.15-4.05-11.84%
    DRDATSONS.BO
    19.55-2.45-11.14%
    MARAL.BO
    121.50-13.50-10.00%
    POKARNA.BO
  •  
    Recent Quotes
    Symbol Price Change % ChgChart 
    Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
    You need to enable your browser cookies to view your most recent quotes.
  • Recent Quotes News

    •  
      Sign-in to view quotes in your portfolios.