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Survey Reveals Actual Cost of Employee Absenteeism

Sept. 2, 2008 — According to preliminary survey results, the average yearly direct and indirect costs for major absences add up to about 36% of base payroll.

In an effort to determine the real financial impact of absences by all classes of employees, Kronos Inc. conducted a survey this summer using an online survey questionnaire by Mercer using answers from 455 respondents in all major industries and sizes throughout the United States. The companies included in the survey had an average of just over 5,000 U.S. employees who were eligible for benefits.

The survey investigated the class of employee and the type of absence. Key survey findings:

  • The total costs of all major absence categories, including direct and indirect costs, average 36% of base payroll. These costs range from 25% for exempt employees, to 39% for nonexempt salaried and nonunion hourly, and 49% for union hourly.
  • The average total costs of incidental unplanned absences are 6% of payroll, or three times their direct costs of 2.0%.
  • The total costs of extended absences average 3.2% of payroll, more than five times their direct costs (0.6% of payroll). The direct costs for these absences are moderated by the fact that some of these absences are unpaid (e.g., some FMLA-qualified leaves) and those paid through a disability plan typically have a benefit of less than full salary.
  • The combined total costs for incidental and extended absences – the kinds of absences employers try to minimize – add up to 9.2% of payroll, versus their combined direct costs of 2.6% of payroll.
  • The total costs for planned absences, like vacations and holidays, average 26.6% of base payroll. This figure is 2.8 times their average direct costs of 9.6% of pay.
  • Incidental unplanned absences result in the highest net lost productivity per day (i.e., work that is missed or postponed by not being covered by others): 21%, versus 15% for planned absences and 17% for extended absences.
  • The number of incidental unplanned absence days per employee per year averaged 5.3 days across all employee classes, and ranged from 3.8 for exempts, to 4.9 for nonexempt salaried, to 5.6 for nonunion hourly and 6.7 for union hourly.

The full survey findings are expected to be released in mid-September.

For an in-depth exploration of some of the common ways to manage absences, including PTO, see the June 2008 workspan article: “Are PTO Programs All They’re Cracked up to be?”

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Reader Comments
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Tue September 9, 2008 12:25 PMReport Abuse
Mercedes McBride-Walker
Research Consultant
Member Since: 1/1/2001
Comments: 65
This is critical information, enunciating the importance of finding how to engage and then keep employees engaged to reduce some of the unnecessary absences. I look forward to the full survey findings.
Tue September 9, 2008 9:44 AMReport Abuse
Windsor Lewis
Compensation Manager
Member Since: 11/1/2004
Comments: 118
Nice summary, but would like to see the full survey results to determine the relevancy of the data acquired/studied.