Turn high costs of absenteeism into a competitive advantage

The Adcorp Employment Index estimates that 3.4 million South African workers were absent during 2011 owing to sickness—up from 700 000 in 2000.

October 29, 2012

The Adcorp Employment Index estimates that 3.4 million South African workers were absent during 2011 owing to sickness—up from 700 000 in 2000. This is an increase of 397% over a decade, and at a time when job growth was flat at best. And between 2009 and 2011, one-quarter of all workers took up in full the maximum statutory allowance of 36 days of sick leave per three-year cycle.

The Index also calculates that since 2000, the economy has lost R47.5 billion in real terms due to absenteeism. A US study confirms these high figures, putting the total of indirect and direct costs of all absence categories at around 35% of base payroll. Unplanned absences in particular result in the highest net loss of productivity per day: 19% as compared with 13% for unplanned absences.

“While the exact figure will probably always be open to dispute, the Adcorp Employment Index is sufficiently authoritative to confirm just how high absenteeism is, and what it really costs the economy,” says Julia Gilmour, sales manager: Kronos Division at Bytes Systems Integration. “The real question is why South African companies do so little about it.”

As the figures above indicate, substantial amounts of money in the form of lost productivity are at stake. South African workers are not particularly productive (South Africa was ranked 50 out of 59 countries in the World Competitiveness Yearbook 2012) but the first step to getting that right is to get them back onto the shop floor or into the office. “In fact, that’s what clients of mine have noticed immediately—more people actually at work and thus higher production,” says Gilmour.

Absenteeism also carries a direct financial implication because days of annual leave outstanding have to be provided for in a company’s financials. If a proportion of those days provided for have actually been taken, then the company is being defrauded twice, so to speak—once in terms of lost production, and once because it is still having to provide financially to pay out that leave.

“There are two problems here: ensuring that workers only take the leave of whatever type that is owed to them, and then managing the spiraling amount of paid sick leave that workers have come to see as theirs by right,” Gilmour believes. “Putting the right system in place will help solve both.”

Many companies believe that by putting in place a system of leave requests they are controlling the problem, but this is a half measure, at best. The loop is only closed once a company can correlate each employee’s physical presence with his or her leave requests.

In a big company, using a paper-based system consumes a huge amount of resources, and making sense of the data is difficult. That’s why, says Gilmour, automated systems have come into play. Such systems make it easy to provide HR and line managers with easy-to-read reports that summarise the data and identify trends.

“When it comes to sick leave, such a report will help a manager to see whether an employee is abusing the system or has a genuine health problem. In both cases, a back-to-work interview can be scheduled, and a useful intervention crafted that will hopefully return that worker to productivity,” she explains. “Abuse of sick leave can indicate a misperception about the nature of this leave, and also a degree of employee disengagement. This is valuable information and can be used constructively to improve employee engagement and so grow overall productivity and retention rates.”

An absenteeism report can also help a manager spot a problem. In one case, an employee with a good attendance record suddenly began to leave work early on Wednesdays. Picking this up early meant the manager could to address the issue, and found out that the employee needed to attend to a mentally disabled sibling on that day. A shift adjustment to accommodate this genuine need retained a promising resource in the company.

“If we are far-sighted and flexible, we can use this type of system creatively to improve productivity while giving managers a tool to manage employees better—another boost to productivity,” says Gilmour. “The key to closing the loop is a biometric system that allows the company to verify an individual employee’s actual presence at work.”

The challenge here, says Gilmour, is that many white-collar workers resist such initiatives because they associate them with “clocking in”. “There is definitely change management work that needs to be done so that employees can see the positive benefits,” she concludes. “After all, the employee/ employer relationship is a contractual one, and there’s a principle of fairness here that people do appreciate—especially when they see the advantages.”