Measuring, Monitoring & Improving Employee Wellbeing
HR Review - October 2012
It’s a pretty obvious point but any serious discussion on addressing sick absence to improve employee wellbeing often focus on the topic of ‘measurement’- how as an employer will you know if you have a sick absence ‘problem’ or challenge? How will you be able to work out if management of absence has worked or not?, what will ‘success’ and ‘failure’ look like? In short, how can you measure the amount of absence in your organisation and what impact is it and will it have on your business?
These are all critical issues to look at if you are to address absence management. I think you have to go back to first principles and ask yourself why is there a need to measure in the first place? There is the old management mantra which goes along the lines of “you can’t manage what you can’t measure”. That is to say, that if you don’t know how well or badly something is doing, then you can’t influence it. This is still sound stuff today and an important element of being a wellbeing or absence management practioner is how you are going to measure the historical and current level of absence to establish the degree of the problem and how you will manage any project to manage or improve it.
To begin with though you do need to understand what the financial and business costs are to your organisation of sick absence- what kind of impact is it having on resources? How is it impacting on the ‘bottom line’ if you are a ‘For Profit’ organisation or if you are in the public sector how does it affect the services you are providing?
There are various forms of ‘costs’ but usually the two most significant are a) the financial cost and b) the Impact on business and the two are not necessarily the same. So, let’s look at these costs:
What’s the financial cost?
This is often seen as the most important cost. The cost to the employer of an employee being sick depends very much on what kind of sick pay arrangements apply. In the Civil Service for example, people are on full pay for the first six months of sick absence, whilst with a range of private employers entitlement to sick pay is often restricted to those who have been with the company for a minimum amount of time and can be limited to a total of 3 months or less in a year. Some organisations do not offer any company sick pay with employees being paid Statutory Sick Pay (SSP) only.
But it is important to establish what the direct cost of someone’s absence is . Through one HR management IT tool or another you need to work out the total absence taken by people and its cost. Typically a good quality system will work out total absence over a reporting year for example and divide that by the number of employees to give an ‘average’ level of absence per employee. If say, you employee 100 people and total absence in the last 12 months was 500 days, then that would work out at each employee on average taking 5 days absence a year. Let’s say that the average pay cost for each person is £20,000, then 5 days absence would cost around £420 per person or £42,000 for all of employees. That would amount to around 2% of your pay bill but If you have a turnover of say £500,000 then the sick pay cost is around 8% -not insubstantial. But there are other costs too . Whilst you may be paying for someone who is sick, what about the work that needs to be done in their absence? You might be paying overtime for someone to carry out their work or even engage a temporary member of staff through an Agency. These other costs can soon ramp up and be a serious burden on the organisation.
The Business Impact?
There are other costs to an organisation – some of whom are often hidden. Financial costs can be established –even crudely – from a decent spread sheet or IT model, but the impact of employee absence on profits or/and the services you provide can often be harder to determine.
If people are off sick, whether long term or through regular absences, then who does their job when they are not there? If you take the view that you cannot afford to replace them temporarily or be able to re-assign other individuals to carry out their task, it will mean that certain things may not be done. Sales may not happen, invoices may not be raised, front line services may not be provided which can lead to customer dissatisfaction, the bottom line of a company can be adversely impacted and for a public sector organisation there can be political and reputational damage.
There is also the ‘opportunity cost’ i.e. if someone is off sick and their absence is causing a problem then as an employer you need to address that issue. That may involve a line manager having to seek advice from HR on how to deal with the absences or for having to engage a HR services company to deal with protracted and longer term and damaging absences. This all takes time and whist that manager is trying to manage the person and their absence, they are probably not delivering the profits or services an employer seeks- these are the kind of hidden costs that you need to be aware of and look at how to capture them.
Author: Bryan Matthew