Absence Management: Are You Losing Money?

Absence management is a core function of the Human Resources department. If handled correctly, it can help companies reduce absenteeism, boost productivity, and lower associated costs.

In this post, we will discuss the benefits of effectively managing absences in the workplace. We will also look at what policies and best practices will help you effectively monitor employees on sick leave. Finally, and most importantly, we will examine how much money your company could be wasting by not using absence management software.

• Why Do Employees Miss Work?
• Absence Management Definition
• What is an Absence Policy?
• Which Laws Should I Consider?
• The Bradford Factor
• Why is an Absence Management Policy So Important?
• Best Practices to Reduce Absences
• How Do You Train HR to Manage Absences?
• Absence Management: What Does it Cost Your Company?
• Benefits of Using Absence Management Software

Why Do Employees Miss Work?

There are many reasons why people miss work. Whilst it is normal for an employee to occasionally be absent, repeat offenders can have an effect on productivity and morale.

Reasons for missing work can include:

• Minor complaints such as colds and viruses
• Recurring medical conditions such as asthma
• Acute medical conditions such as cancer 
• Back pain and repetitive strain injuries
• Injuries in and out of the workplace
• Mental health issues including stress, anxiety, and burnout
• Workplace stress from heavy workloads
• Responsibilities such as childcare
• Workplace harassment
• Lack of motivation
• Medical appointments
• Bereavement
• Family emergencies

Whilst minor issues are the most common reason for missing work, ongoing absences account for a large proportion of missed work. Missing work because of stress and mental health issues is also a major concern. This is why it is important to use return to work strategies to support employees and help them return to their duties as soon as possible.

Absence Management Definition

Leave and absence management involves tracking and measuring absences from the workplace. It generally refers to unplanned absences caused by illness, health issues, and circumstances such as bereavement. It does not cover planned absences such as annual or parental leave.

The aim is to monitor, reduce and respond to absenteeism. An effective absence management system should support the needs of employees and provide clear and consistent guidance. 

There are a number of methods that measure the rate and frequency of absences in your company. Effective absence management involves implementing proactive measures such as the following:

• Writing an absence policy
• Analyzing absence data to detect patterns
• Requesting doctor’s notes for absences over 5 days
• Allowing self-certification for absences under 5 days
• Conducting return to work interviews
• Reviewing long term and/or problematic absences
• Taking disciplinary action when needed
• Verifying illness after a specified period of time
• Rewarding employees with excellent attendance.

These measures can help you understand the effect absences have on your business. The financial cost is the most obvious effect, but absences can also result in disruption, increased workloads for other employees, and decreased productivity. Effective management is vital for a business of all sizes and it is important to get it right. 

What is an Absence Policy?

An absence policy is a clear set of guidelines for managing time off. It informs employees of the attendance procedures they must comply with. It also details how absences are measured, and what disciplinary measures will be taken if standards are not met.

A standard policy details what employees must do if they are unable to work. It confirms who they should inform, and within what time frame. It provides guidance for returning to work after a long period of absence and includes incentives for reducing absences, such as flexible working. Policies must be fair and clear, and be communicated to all employees and managers.

The following should be included in your HR absence management policy:

• Procedures for notifying managers of an absence
• Whether the company provides the statutory or enhanced sick pay
• Guidance for self-certification and fit notes
• When return to work interviews will be conducted
• How the company supports employees (amended duties, altered hours, workplace adaptations, etc.)
• Tools for measuring absences (such as the Bradford factor)
• Incentives to encourage attendance
• Disciplinary actions will be taken if employees do not comply.

Which Laws Should I Consider?

There are various legal considerations that you must take into account when writing your policy. Compliance laws will help you avoid any potential employee disputes. 

Relevant HR laws: 

• The Fair Labor Standards Act (FLSA) 
• The Family and Medical Leave Act (FMLA)
• Workers’ compensation laws 
• The Americans with Disabilities Act (ADA)
• Federal and state equal employment opportunity laws
• Regulations relating to wages, hours, and overtime
• State and local paid sick leave laws. 

The Bradford Factor

The Bradford Factor is used to analyze attendance. The formula takes into account both the frequency and duration of absences. It is considered to be a much fairer way to measure attendance and detect repeat absences. Data can be used to detect internal trends, such as higher rates of sick leave in specific departments. It can also be used as a benchmark to compare attendance levels with other companies in the sector.

Measuring lost time with equations such as the Bradford Factor will help you understand any attendance issues in your company. Other measures such as the lost time rate (percentage of possible working time lost to absence) and frequency rate (average number of absence periods per employee) are also helpful.

The Bradford Formula:

S² x D = B.

S is the total number of separate absences by a person, multiplied by itself.

D is the total number of days an employee has been absent.

B is the Bradford Factor score.

The results can then be compared with a series of internally-created benchmarks, such as:

0 points = no concern

51 points = informal verbal warning

201 points = written warning

401 points = final written warning

601 points = reasonable cause for dismissal.

Why is an Absence Management Policy So Important?

A clear and concise policy helps employees understand their rights and responsibilities. It also helps you comply with legal obligations. When employees know what is expected of them, it makes it easier to enforce disciplinary action when required.

If absences are not tracked and controlled they can have a number of effects on a company:

• Repeated absences can affect productivity
• Low attendance rates have a financial cost for the company
• When someone is absent, someone else has to pick up the slack. This can leave team members overworked and lead to stress if absences are frequent
• Overworked employees can also affect morale and motivation
• Absences can lead to disruption
• They can affect the quality of products or services offered to clients. 

https://www.youtube.com/watch?v=W5igZeA4EnA

Best Practices to Reduce Absences 

Aside from designing a comprehensive policy and analyzing data with methods such as the Bradford Factor, there are a number of best practices which you can include in your absence management program:

• Establish clear expectations. Make sure employees are aware of all policies and understand what is expected of them. 
• Reward good attendance. Encourage employees to reduce unnecessary absences with rewards such as extra holiday days. This will motivate them to maintain a good attendance record. 
• Support employees that are experiencing issues that might affect their attendance.
• Consider implementing a flexible working policy. 
• Offer training on coping with stress and mental health issues. 
• Promote healthy lifestyles. Offer employees perks such as free gym membership or yoga classes.
• Implement an Employee Assistance Program. This could include counseling services for stress management.
• Encourage planned vacations so that employees recharge their batteries and avoid burnout.
• Communicate regularly with employees on long-term sick leave. Work with them to plan their return and offer guidance and support. Make adjustments to working conditions where needed.

How Do You Train HR to Manage Absences?

If you want your employees to understand attendance standards in your company, your HR department needs to be well-trained and informed. In other words, you need to provide them with the right tools and support so that they can effectively manage absences.

This could include:

• Clearly defining roles for employees, managers, HR, and occupational health
• Training HR on sensitively handling employee health issues. Teach them how to be discrete and use their own judgment 
• Providing guidance on supporting employees returning to work
• Clarifying when HR will carry out disciplinary measures
• Establishing which tools HR will use to measure absences
• Implementing an absence tracking system and providing regular training.

Absence Management: What Does it Cost Your Company?

If an employee is absent, somebody else needs to pick up the slack. These extra duties can leave an employee feeling stressed and overworked. This is where an absence management software comes into play. Absences have an obvious effect on morale, productivity and quality. An overworked employee, after all, is far more likely to make mistakes.

Aside from the impact on employee morale and workload, absences cost your company hard cash. Employers often overlook this as, all too often, they consider absences to be a necessary payroll expense. However, the financial impact doesn’t stop there as there is a direct and indirect impact on cost. 

• The cost of absenteeism in US companies runs into the billions of dollars each year in lost productivity, wages, and poor quality goods and services. 
• The US Department of Labor (DOL) estimates that close to 3 percent of a company’s workforce is absent on any given day. 
• According to a study in SHRM, employee paid time off accounted for 15.4% of payroll costs. 
• The total cost includes wages for the absent employee, the cost of replacement workers, overtime, and administrative costs.
• According to the U.S. Centers for Disease Control and Prevention (CDC), lost productivity due to absenteeism costs employers $1,685 per employee each year.

Benefits of Using Absence Management Software 

Managing intermittent leave can be complicated. You need reliable data and you need to track it regularly. The right HR tools can help you take the next step. In short, if you are still using Excel, you could be wasting a lot of time and money. 

Leave of Absence management software can: 

• Simplify your processes
• Decrease absences
• Minimize errors 
• Track absences on a calendar
• Identify repeat offenders
• Recognize the various types of absence
• Support return to work interviews
• Provide HR staff with easy access to data
• Reduce the cost of managing absences 
• Give employees access to their sick days and leave entitlements
• Identify absence trends
• Help you calculate and reduce the true cost of absences in your company. 

Manage employee absences with Factorial’s holiday leaves software.

Written by Cat Symonds.