Absence is a cost to the business, that much is fact. How much it costs is debatable. CIPD estimates the cost of absence in its annual Absence Management Survey (£609 per employee per year, 2014) as does the CBI (£975 per employee per year, 2012) but these figures are both averages based on a limited sample of companies.
Calculating your absence level
The average cost per employee per year published in the annual surveys is a useful eye-opener for those new to absence management. Yes, absence is expensive. But what you really need to know is the full cost of absence to your business. In order to arrive at this figure, you need to have an idea of your organisation’s absence level. The best way to find that out is to collect complete and accurate absence data.
Even if you don’t know your own absence level (yet!), it can be useful to estimate the cost based on benchmark figures in your sector. That's why we have programmed into our calculator the sector averages based on the CIPD 2014 data. It is worth noting that in our experience these averages are lower than the real levels of absence because the surveys are conducted based on a small sample of companies, which tend to already be managing their absence. In a company that is just starting their journey toward best practice absence management, absence levels are likely to be considerably higher.
Variable direct costs affect the cost per day lost
The costs related with absence vary a lot by sector and the nature of work. For example, a 24/7 security company will need a high proportion of absent employees replaced by agency or standby staff whereas office based teams may be able to manage quite a long time without replacement staff. In addition to that, most companies employ people in different roles with different costs related to absence. Cost of replacement staff is just one example of the direct costs of absence. You can use our calculator to estimate the direct costs to your business.
Total annual cost of absence
Once you know your absence level and the cost per day lost, you are finally in business to calculate the total (direct) cost of absence to your company. Our calculator will do the number crunching for you!
Indirect costs add up too
The direct costs of absence are easy to quantify but you should not overlook the indirect costs. These include administration time and management time spent recording, replacing and reviewing absence. They also include penalty fees for missed deadlines or unmet SLAs, lost opportunities, impact on client satisfaction and retention, not to mention reduced productivity.