Member Article

Businesses struggle to measure the cost of absenteeism

• Absenteeism costs the UK nearly £30bn annually and equates to more than 7 days lost per person
• Flexible working rights encourage a 38 per cent drop in absenteeism and benefit businesses to a value of £55.8 million
• 66 per cent HR executives desire real-time information about absenteeism across their organisations – while 54 per cent would appreciate alerts to new figures and trends as they become available

Nottingham, UK, 21 January 2015 – Absenteeism costs UK businesses around £30bn a year (PwC). However, when organisations manage absenteeism, questions are raised about the best way to measure and report on this issue. MidlandHR has surveyed over 120 HR professionals across organisations in the private sector, public sector and not-for-profit sector to identify attitudes towards absence management and reporting. Today, it has released its findings in a new report, Understanding Absence Management.

It found that 65 per cent of professionals said absenteeism is managed through combined efforts between HR and line managers – while 85 per cent rely on reports to assist with communicating about the state of absence. Although the need for reporting hasn’t changed much over the past 20 years, what is interesting is that 66 per cent desire this information in real-time and 54 per cent of respondents would appreciate alerts to new information as it is available.

This is typically where sophisticated HR technology systems are powerful. They enable HR and management teams to capture and store information about absenteeism in real-time in one central location. This enables quicker, more accurate and insightful management decision making to occur.

Further, when placing these statistics alongside the cost of absenteeism to UK businesses, and the current trend towards flexible working, it stands to reason that better reporting could help businesses improve absenteeism management. They’d be able to work out causes of absenteeism, identify anomalies and plan resources more efficiently.

Absenteeism costs almost £30bn annually

The financial cost of absenteeism to the UK market is approximately £30bn a year (PWC), which equates to around 7 days lost per person every year (CIPD). There are many reasons for absenteeism, but these days it is commonly accepted by professionals that a contributor to absenteeism can be down to the poor implementation of – or no – flexible working practice, which can often result in increased levels of short-term absence.

Of course, the true reason for absence could be down to a number of variables, including personal errands, childcare and disenchantment with the working environment (colleagues, tasks, management). The key here, regardless of the reason, is for organisations to get a grip on the state of absenteeism across their business. This includes measuring and reporting on a range of factors, such as dates, length of time, employees’ role and line manager, and so on.

Flexible working can reduce absenteeism by 38 per cent

In contrast, if flexible working is successfully implemented it can help reduce absenteeism. In June 2014 the UK government announced flexible working rights. It believes flexible working will encourage a 38 per cent drop in absenteeism and benefit UK business to a value of £55.8 million, outweighing the current high cost of absenteeism. So, as businesses develop strategies to deal with absenteeism, through flexible working, reporting capabilities must improve in order to help HR teams manage this trend.

Confusion over the cost of absenteeism

MidlandHR’s survey also identified that organisations vary in how they define the cost of absence to the business. 56 per cent refer to the employee’s salary including allowances, benefits and on-costs such as employers NI, pensions and overtime that has been incurred; 41 per cent use a combination of salary plus allowances, benefits and on-costs, such as employer’s NI and pensions; and 3 per cent base the cost on the employee’s salary alone.

Therefore, organisations - that invest in how they measure the cost of absence to the business - will be able to identify where problems are occurring; what the cost to the business is; forecast and plan for potential problems and ultimately develop strategies and initiatives that enable them to manage these challenges and reduce the negative financial consequences for the business.

“Clearly, businesses are still struggling. This latest research highlights a real lack of consistency in measuring and reporting absenteeism. Therefore, the way businesses measure absence needs to improve and the only way this can truly occur is by improving the entire absence management process,” says Richard Thomas, Director, MidlandHR. “Of course, modern HR systems have a role to play in providing more sophisticated and intelligently presented absence information. But this is only one part of the story. Management teams need to be able to draw meaningful insights from these reports so that they can improve their processes, management styles, employee engagement, productivity and, crucially, the bottom line.”

The Understanding Absence Management report can be downloaded here.

ENDS

About MidlandHR

MidlandHR provides technology-driven HR, talent management and payroll solutions for over 500 enterprises, underpinned by a dedicated and certified team of experts. We work in partnership with firms to create a strategic HR function. Our customers rapidly realise bottom line business benefits enabled through industry leading software and outsourcing services. MidlandHR injects best practice processes into the entire employment lifecycle, from recruitment to succession planning. This enables customers to transform their business by removing administrative burdens, reducing operational costs, and retaining and developing business critical talent in line with corporate goals.

MidlandHR has been awarded Service Provider of the Year 2014 by the CIPP, Outsourcing service provider of the Year at the National Outsourcing Association Awards, Software Product of the Year 2014 by Payroll World Magazine, and reached the finals for HR Supplier of the Year 2014 at the CIPD Awards.

Customers include: Cafcass, Net-a-Porter, TK MAXX, T.M.Lewin, City of Edinburgh Council, The Salvation Army, Greater Manchester Fire and Rescue, Nottingham City Transport, Plymouth University, Laing O’Rourke, Gateshead College, Home Group and more. See what our customers say here: http://bit.ly/MHRCustomers

For more information about MidlandHR, visit: www.midlandhr.com

This was posted in Bdaily's Members' News section by MidlandHR .