Managing Employee Attendance

Overview

Employee absenteeism is a significant problem for most organizations. In 2017 the U.S. Department of Labor (DOL) estimated that almost 3 percent of an employer's workforce was absent on any given day. The high price of absenteeism affects organizations even more when lost productivity, morale and temporary labor costs are considered. The cost of absence is often misunderstood, seen as not easily measured or dismissed as a negligible amount because the costs are largely included in payroll expenses. In addition, employers often fail to carefully track absenteeism. See Bureau of Labor Statistics.

To address this issue, HR professionals are encouraged to develop a business case and to devise and implement plans for managing employee attendance in their organizations. The following topics related to managing employee attendance are presented in this article:

• The direct and indirect costs of absenteeism.
• Collecting attendance data for the organization.
• Measuring the cost of absenteeism.
• Calculating rates of absenteeism.
• Strategies aimed at addressing the organization's particular attendance issues.
• Legal issues that come into play when designing and implementing absence control strategies.

Business Case

Many firms still underestimate the magnitude of the problem of employee absenteeism. Instead, they consider such absences to be part of "the cost of doing business." From that perspective, they fail to quantify the full impact of employee absenteeism. In addition, they also fail to appreciate the value of solutions that can reduce the costs and lost time that result from employees' being off work.

Compelling evidence supports quantifying and tracking the costs of absenteeism, both the hard-dollar costs (e.g., salary, benefits and replacement workers) and the soft-dollar costs (e.g., reduced morale, which cuts productivity). According to the Centers for Disease Control and Prevention (CDC), "productivity losses from missed work cost employers $225.8 billion, or $1,685 per employee, each year." By carefully planning and designing policies, managing absenteeism and its administration, and tackling the underlying causes (e.g., health issues, employee morale), an organization can significantly reduce the impact of employee absences on its bottom line.

HR professionals need data about the costs of absences to their organization to gain management support for focusing on an absence control strategy. According to Kronos, the total cost of employee absences, unplanned and planned, is more than twice the average employer's cost for health care. See Total Financial Impact of Employee Absences in the U.S.

Organizations must remember that all lost time by an employee is connected. Lost time includes absences due to on-the-job injury, short-term disability and family or medical leave, as well as absences that are only a few days in duration. Employees who have frequent intermittent absences appear to be three to four times more likely be out on short-term disability. In addition, employees who leave the organization on short-term disability are more likely to make heavy use of group health benefits.

HR's Role

HR professionals are involved with every level of employee absenteeism. They draft and administer sick-leave policies and procedures, field calls from employees calling in sick, determine whether a doctor's note is required, send employees home who report to work with communicable illnesses, apply federal and state leave laws to the particular circumstances at their organizations, establish metrics and technology systems to monitor absenteeism, inform managers about absenteeism issues, and provide information about or recommend to senior executives measures to control absenteeism. See Managing Through Flu and Other Epidemics in the Workplace and Employers Use Technology and Outsourcing to Ease Leave Management.

Collecting Data on Absenteeism

The key to controlling absenteeism lies in correctly assessing the nature and extent of the problem, so the organization can determine and apply the proper controls.

A variety of tools—both manual and automated—are available to enable HR professionals to monitor employee attendance. Among the most common are:

• Absenteeism spreadsheets.
• Weekly time reports.
• Attendance policies.

Using whatever tools are at its disposal, an organization should design its research to determine:

• What absenteeism problems exist.
• Why the problems exist.
• Which solutions are appropriate.

The most common way to research the issue is to undertake a historical study to ascertain the extent of the problem and whether it is improving or worsening. Further analysis can help pinpoint specific problem areas, such as geographic locations, departments or divisions experiencing higher-than-usual absence rates. Once an organization attempts to control absenteeism, continued monitoring of the efforts is necessary to gauge their effectiveness and to make adjustments as needed.

Cost of Absenteeism

Organizations should consider the direct costs in payroll when calculating the cost of employee absences, as well as the impact of indirect costs, such as those associated with productivity loss.

Direct costs

Direct costs are the easiest to quantify, consisting of employee PTO, accounting for wages/salaries, overtime costs and replacement-worker costs.

Indirect costs

Despite the significance of direct costs, indirect costs represent the larger impact of employee absence. Indirect costs result when work is delayed or co-workers and supervisors are affected because of an employee's absence. Lost productivity is a significant consequence of unplanned absences that must be factored into an organization's indirect cost calculation. Even a modest reduction in unplanned absenteeism can result in significant productivity savings.

Measuring the costs of absenteeism

Several methods for determining the cost of absenteeism in an organization are available.

Some of the most common methods are to calculate:

• Loss in multiples of salary. Studies have shown that the cost of each person who is absent is actually a multiplier somewhere between one and two applied to the cost of the salary. The more impact a person has on a team or department, the greater the multiplier.
• Loss in full-time equivalent positions. Another measure of absenteeism is to express cumulative lost time in terms of full-time equivalent positions.
• Loss in productivity and quality. Employers can measure and evaluate the cost-effectiveness or quality in disability management and absence management programs and benchmark their results against other firms.

Calculating Rates of Absenteeism

Absenteeism rates can be calculated in a variety of ways and determined by division, department, shift, location, type of employee, union/nonunion status, job family and other factors. Absenteeism may be particularly critical in some jobs and shifts when substitute workers have to be employed to replace the absent employees. Calculations can be made on a weekly, monthly, quarterly, semiannual or annual basis. Daily or seasonal patterns, such as frequent Monday or Friday absences, may also exist.

Organizations can gain additional insight into their absenteeism issues by separating data according to short- and long-term absences. Clearly, an employee who is absent five times for periods of three days presents different problems from an employee who is absent 15 times for one day. Computing the number of absences by their durations can be useful in developing absenteeism policies and controls.

The following are three common ways of measuring absenteeism, each of which can provide an organization with different insights into its absenteeism problem.

Incidence rate

The incidence rate is a measure of the number of absences per 100 employees during any given work period. In its basic form, this measure does not account for the duration of an employee's absence. The basic formula for the incidence rate is:

Number of incidents of absence x 100
Number of employees

Thus, an organization with 1,000 employees and 220 incidents of employee absence during one month has a monthly absence incidence rate of 22.

Inactivity rate

The inactivity rate measures the percentage of time usually worked or scheduled that is lost due to absenteeism. The formula is:

Total hours of absence x 100
Total hours scheduled to work

One thousand employees scheduled to work eight hours per day during a 22-day work month total 176,000 scheduled work hours for the month. If total employee absences equal 400 days (3,200 work hours) during the month, the monthly inactivity rate would be 1.8.

Severity rate

The severity rate is a measure of the average time lost per absent employee during a specified time period. The basic formula for this measure is:

Average number of hours lost by absent employees x 100
Average number of hours normally worked by absent employees

If 220 employees lost 3,200 hours during a month through absence, they averaged 14.55 hours lost per absent employee. If each of them was scheduled to work 22 days of eight-hour shifts during the month, they averaged 176 hours of time normally worked. The severity rate calculates to 8.3.

Another version of this measure is as follows:

Number of employee days lost through absence in a specified period x 100
Average number employees x number of workdays in the period

If 400 days were lost through absence in one month and 1,000 employees were scheduled to work 22 days (for a total of 22,000 days), the severity rate would be 1.8.

Strategies for Managing Employee Absences

Common approaches to absence management include:

• Taking disciplinary action for excessive absenteeism.
• Verifying illness after a specified period of time.
• Using PTO banks to help reduce unscheduled leave.
• Focusing on personal recognition for employees with positive attendance records and behaviors.
• Encouraging planned vacations to allow employees to recharge.

Employers need to ensure that their policies and practices are comprehensive, promote appropriate employee behaviors, and are well-communicated and understood by employees and supervisors alike. See How to Design a 21st Century Time-Off Program.

Supervisor training and designated HR support

Though centralized systems for tracking attendance are increasingly popular, supervisors still spend considerable time managing absences. Much of this time is spent locating replacement workers to cover for absent employees. Although supervisors are responsible for enforcing the organization's attendance policy, they often lack training about the guidelines and their enforcement. As a result, an HR professional must have designated responsibility for the company's overall absence management program and provide training to aid supervisors in their efforts to enforce it. See Leave Management Continues to Vex, but Outsourcing and Integrated Systems Help.

Absence control programs

Traditional sick day policies (which typically include mandatory discipline) may make it difficult for employees to do the right thing. For example, if an organization allows each employee five sick days a year and takes disciplinary action on the sixth absence, an employee who has been incapacitated with the flu for several days may choose to come to work ill rather than risk discipline. In other words, some traditional absence control and sick day policies may inadvertently encourage employee "presenteeism" (e.g., coming to work sick and possibly infecting others), resulting in even more lost productivity and absence. See How HR Can Help Curb Presenteeism.

PTO banks

PTO plans provide employees with a bank of paid leave time to be used for various purposes, in contrast to more-traditional programs that provide set amounts of leave for sickness, vacation and tending to personal matters. PTO banks can be an effective absence control program.

PTO programs may also help manage the problem of presenteeism. With PTO, employees have more discretion as to how to use all their available leave. An ill employee can take a day from the leave bank and stay home without worrying about disciplinary action or exhausting a limited number of sick days. See Employers Are Banking on Paid Time Off.

However, this type of program may not be effective in dealing with specific individuals or workgroups that have excessively high rates of absenteeism. Other approaches—such as alternative work arrangements, job redesign and improved safety measures—may be necessary for them. The careful analysis of detailed data can facilitate the identification of these problems and suggest possible remedies. 

Incentives

Sick-leave incentive plans—also known as attendance bonuses—take many forms, from a monthly, quarterly or annual cash bonus to gift cards or extra planned time off. But what would make an organization give employees something extra just for coming to work? The answer depends on the nature of the business. Employers focused on delivering services (rather than products) are more likely to be concerned about employee absenteeism and therefore more likely to implement such programs.

For a modest investment, employers can decrease absenteeism, increase productivity and reduce the amount of time managers need to spend juggling schedules to ensure an acceptable service level. Such plans need not involve large cash payouts but can be as simple as recognition (e.g., an e-mail to everyone) or a $25 gas or movie card. The manner in which the reward—no matter how small—is distributed is key to a successful program. It has more impact if a senior manager is the one saying thanks and handing the employee the card. However, not every program fits every department. Customized approaches may be needed to solve specific problems and to avoid unwanted presenteeism.

Wellness initiatives

A clear link exists between managing health care and absenteeism and keeping productivity high. If employees are not at work—or are at work but not feeling their best—productivity suffers. A SHRM strategic benefits survey found that about two-thirds (68%) of HR professionals indicated their organization offered some type of wellness program, resource or service to employees. Among these respondents, 65% reported that wellness initiatives were "somewhat effective" or "very effective" in reducing the costs of health care; 72% indicated they were "somewhat effective" or "very effective" in improving the overall physical health of their employees.

Gallup¹ studied five elements of well-being (purpose, social, financial, community, physical) and found that workers who are thriving in all areas have lower absenteeism, have higher customer ratings, are better problem solvers and are quicker to accept change than employees who are only thriving in one element.

See Designing and Managing Wellness Programs and Employers Take Wellness to a Higher Level.

Improving morale

Employee morale can affect an employer's absenteeism rate: Organizations with good or very good morale experience a lower rate of unscheduled absences than those reporting poor or fair morale. Likewise, the effect of morale on how well absence control programs work is reflected across the board. Overall, organizations with good or very good morale rate their absence control policies and work/life programs as more effective than do their counterparts with poor or fair morale.

Legal Issues

As a general principle, management retains a good deal of flexibility in establishing the days and hours of work expected, rules for employee attendance, and the consequences for excessive absences and paid- or unpaid-leave policies.

However, a complex set of federal and state laws that were enacted for different purposes, in light of different historical conditions—and not designed to mesh well with one another—has made significant inroads on the employer's discretion and has created many opportunities to misstep. It is outside the scope of this article to delve deeply into any or all of these laws. Rather, the intent of this section is to call the HR professional's attention to the major categories of laws that must be taken into account and to point the reader to more in-depth resources for managing employee attendance in light of applicable law. However, this area of employment law is so technical, complex and in flux that HR should never rely solely on generalized information, but rather work hand-in-hand with expert employment law counsel to determine appropriate organizational responses to the various types of absence-related issues. See Viewpoint: Firing an Employee with FMLA Leave and Unexcused Absences.

Types of laws

Among the types of laws that employers must consider in establishing, implementing and enforcing their absence control programs are the following:

Wage and hour laws. Employers must take care that their policies and practices with respect to work absences do not run afoul of the federal Fair Labor Standards Act (FLSA) and comparable state wage and hour laws, which provide for a minimum hourly wage and overtime for covered employees. The greatest risks lie in making improper absence-related deductions from the pay of employees who are considered exempt from these laws. Doing so may result in a finding that they are, in fact, not exempt and therefore eligible for overtime, thus exposing the employer to significant potential liability.

Paid-sick-leave laws. Numerous state and local paid-sick-leave laws place obligations on employers to accommodate absences for sickness and include restrictions on discipline and documentation. Employers need to understand the laws in locations where employees work and keep an eye out for new legislation across the nation. 

Family and medical leave laws. The federal Family and Medical Leave Act (FMLA) provides eligible employees with up to 12 weeks of protected leave to care for a spouse, child or parent with a "serious health condition" or on account of the employee's own serious health condition. Family and medical leave laws dramatically affect employers' discretion with respect to their policies and practices regarding covered absences. Nevertheless, employers still have options in how they integrate family and medical leave requirements with employer-specific ways of dealing with absences. A detailed discussion of the FMLA and comparable state leave laws is outside the scope of this article. See Managing Family and Medical Leave.

Military leave laws. Two federal statutes mandate leave related to military service: the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) and the FMLA. Together, USERRA and the FMLA create four types of legally protected leave:

• Military leave for the affected employee.
• Military family leave for the employee who has a military-service-affected family member.
• Medical leave for the affected employee.
• Family medical leave for the employee who has a military-service-affected family member.

In addition, both USERRA and the FMLA create post-leave job protections, although USERRA job protections differ substantially from FMLA job protections in terms of the "escalator principle" and otherwise. Both USERRA and the FMLA have anti-discrimination and anti-retaliation provisions. See Managing Military Leave and Military Family Leave.

Workers' compensation laws. Workers' compensation laws in all 50 states provide victims of industrial accidents and occupational disease with medical treatment, vocational rehabilitation, wage-loss indemnification, and death and burial benefits on a no-fault/exclusive-remedy basis. The employer is responsible for injuries and ailments that arise out of and are in the course of employment, regardless of who actually caused the accident. There is no set limit for the amount of leave available in connection with a job-related injury. But state regulatory agencies and courts recognize that there are reasonable limits. Note, however, that an Ohio court ruled that an employee who is receiving temporary total disability benefits may not be discharged solely for absenteeism when the absence or inability to work is directly related to a compensable injury. Employers should consult with legal counsel prior to taking adverse action against an employee who is absent due to a work-related injury or illness.

Disability discrimination laws. Employers must take into account the federal Americans with Disabilities Act (ADA) and comparable state laws in enforcing their absence control policies. Although regular attendance might be considered an essential job function, an employer risks violating the ADA if it fails to consider modifications to its attendance rules as a possible accommodation. For example, a strict punctuality policy that is uniformly applied does not insulate an employer from liability under the ADA when punctuality is not an essential job function. The same analysis might apply to a no-fault attendance policy.

Other equal employment opportunity laws. All federal and state equal employment opportunity laws prohibit discrimination in terms and conditions of employment, which would include the employer's policies and practices with respect to attendance. See Employer-Provided Leave and the Americans with Disabilities Act.

Unemployment compensation. Excessive unauthorized absences can amount to misconduct that renders a discharged employee ineligible for unemployment compensation. If an employer wants to prove that an employee was discharged for misconduct, it must present competent, substantial evidence showing that the absences were both excessive and unauthorized. Once the employer has proven those points, the burden shifts to the employee to show that the absences were not misconduct.

See Interplay of ADA, FMLA, and Workers' Compensation Training for Supervisors and Is an Employer Permitted to Ask for a Doctor's Note When an Employee Is Out?

Templates and Tools

Attendance Policy

Attendance Awards Policy

Attendance Point System Policy for Nonexempt Employees

Endnotes

[1] Gallup, Inc. (2014, July 07). What Your Workplace Wellness Programs Are Missing. Retrieved from https://news.gallup.com/businessjournal/172106/workplace-wellness-programs-missing.aspx?g_source=link_newsv9&g_campaign=item_222833&g_medium=copy