Managing Employee Absenteeism

Background Statement

Employee absenteeism in the workforce is an extremely costly phenomenon for worldwide businesses. In fact, a study by Health Care Manager (2011) estimates that absenteeism costs billions of dollars per year to American businesses alone. This fact makes the phenomenon of absenteeism of important social concern. Inefficiencies in workplace absenteeism cost the economy greatly, which in turn affects overall job outlook and social well-being. As such, there exists immense theoretical interest in the problem of absenteeism in which both the cause and possible solutions for this problem are of great interest.

While absenteeism creates inefficiency in any company, and therefore wastes overall capital, it also serves as an inconvenience and hindrance to the operating manager and co-workers in the workplace. When employees are absent from their position their respective workloads must be re-allocated to their co-workers and this creates disruptions and inconveniences in workflow and management. Finding the extra time and workforce to cover this additional work on short notice will often serve to disrupt the work performance both directly and indirectly of all of a company’s employees.

Therefore, we can conclude that absenteeism is of serious social concern because of its negative economic effects on a company’s output and growth (Health Care Manager, 2011), and this, in turn, will impact the overall economy negatively. Negative economic impact affects social well-being in that it lowers the number of overall jobs available, and thus increases unemployment. Standards of living are affected by lowered economic growth and development, which is a burden to the daily living standards of everyday people. Additionally, absenteeism is of social concern in the workplace itself, in which disruption is caused in the workplace for both the managers and co-workers to take on the additional workload burden.

Detailed Explanation of Background/Problem Statement

In terms of global economic output, the problem of absenteeism is a growing one that is affecting global growth and development rates. This inefficiency is especially of concern on the social well-being of developing nations, in which very much is dependent upon the economic growth and rate of development of their respective economies in order to decrease poverty and the social hardships associated with poverty.

No country better exemplifies this issue than India, which is home to the 3rd largest service sector economy in the world, and is a rising economy but still largely entrenched in poverty (Pradeep, 2009). Pradeep (2009) explains that when economists reference required economic increases to help decrease poverty rates in India, absenteeism and productivity are closely correlated and of great importance.

The Government of India’s Department of Labor released an Unscheduled Absence survey in 2008 which concluded that the absentee rate was 2.3 percent in 2008 (Pradeep, 2009). While this percentage is actually a slight 0.1 percent decrease from previous years in India, the cost of this absentee rate has actually increased by around 15% according to Pradeep (2009). This means that absenteeism is only aggregating in costliness to the economies of developing nations such as India, which are increasingly dependent upon the service sector workforce to further develop its economic growth and development.

Specific Impacts of Absenteeism on Business

Today’s business environment is more competitive than the world has ever seen, in part due to the increasing competition created by the effects of globalization. As such, employers approach staffing differently than in the past, in which the minimum number of staff are employed to create the maximum amount of production (Pradeep, 2009). This means that the work environment today is much more highly dependent upon its employees in any particular sector of business. This also helps to explain how while the percentage of absenteeism went down slightly in India (in the previously mentioned study), the actually cost of absenteeism has risen tremendously. Each employee is more crucial to the process of a company when a minimum number of staff is hired so that any one member missing from a company ends up costing the company much more in lost work completion.

This loss in productivity due to absenteeism was analyzed by Coles and Treble (2008) to find that there are three main factors that cause absenteeism to lower economic output in companies today. The first of these impacts is that of increased operational costs. This cost is caused by either the delay in work completion created when a worker is absent, or the re-assignment of workload to a(n) employee(s) to finish the workload requirement of the day. In each of these cases, the overall costs of operation for this day will increase either due to the overtime pay given to other employees or the delayed output of the work done by the employee when they finally do return from being absent (Coles & Treble, 2008). Each case cannot help but raise cost to the company. Coles and Treble (2008) site a study in the U.S. which measured the increased costs due to this delay or reallocation of workload. The study concluded that for small businesses, a single unscheduled absenteeism costs between $100 to $500 US .

The next impact on business caused by absenteeism is one of a decrease in organizational morale (Coles & Treble, 2008). Employee morale is said to plummet when there is a need for the assigning of the additional work of an absent employee to their co-workers at a company. This, according to Coles and Treble (2008), increases stress and decreases overall employee productivity as a result. One might think that the additional overtime pay allocated to the coworkers to allow for the additional workload would be good for morale, but Coles and Treble (2008) show that in actuality, additional overtime pay only raises fatigue, which ends up costing a company more due to decreased overall output efficiency.

Coles and Treble also explain that decreased morale due to the increase in workload can create “long-term damage” in the work-force, in which communication problems can evolve and resentment can build due to the re-allocation of co-worker’s overall workloads (2008). Additionally, if the workforce sees that management is unable to correct for workplace absenteeism efficiently, morale can be further lowered in expectation of future stress related to co-worker absenteeism (Coles & Treble, 2008).

The third specific negative impact that absenteeism has on business, according to Coles and Treble (2008), is that of a delay in output goals and deadlines. Absenteeism causes delays in meeting schedules deadlines in that oftentimes, such deadlines rely upon specific team members to meet output goals. Even with additional workload re-allocated to team members for overtime work in the case of absenteeism, the decrease in morale often causes a decrease in output efficiency that will make the delay of deadline goals inevitable. This, in turn, only increases output costs, and depending upon the type of company, can possibly decrease customer satisfaction rates and therefore affect overall profit in the long-term (Coles & Treble, 2008).

Coles and Treble’s (2008) theory on the economic impact of absenteeism can be expanded upon to conclude that there are specific ways to manage absenteeism to best reduce its economic impact, and therefore lessen the overall social problems caused by absenteeism. The first of these management solutions can be for companies to have a clearly announced absentee policy that all employees are trained in. This, according to Pradeep (2009), should help to lower the occurrence of sudden absenteeism, so that employees can better plan for specific absences.

Additionally, Pradeep (2009) explains that “acceptable” rates of employee absence rates need to be figured into the overall profit margins and hiring strategies of companies. There exists general worldwide standards of acceptable rates of absenteeism in human resources, according to Pradeep (2009), which state that a 5 day per week policy is will be most abided by. Also, employers can generally call for employees to work 240 days per year, and can subtract from this about 20 days for holidays and vacations, depending upon the specific amount of holidays each country and state/province offers (Pradeep, 2009).

Conclusion

In conclusion, the problem of absenteeism is a growing one in today’s business environment. This is because of the leaner hiring practices that increased business competition has created, in which employers higher fewer employees and have a greater work output demand on said fewer employees. As such, when absenteeism does occur under this environment, there is an increased negative economic effect on the company. This economic effect results in lower overall economic output, which affects the economies of companies on the whole, and especially causes a social impact in developing nations that rely upon economic growth and development to increase social well-being. Therefore, the theoretical interest in understanding and reducing workplace absenteeism is of vital social concern.

References

Coles, M.G., & J. Treble. (2008). Updated: Calculating the cost of absenteeism. Labour Economics 3,169-188.

Health Care Manager. (2011). Department manager’s checklist: Absenteeism. Retrieved from http://av4kc7fg4g.search.serialssolutions.com.ezproxy.apollolibrary.com

Pradeep, K. (2009). Managing employee absenteeism. Economic Challenger. Retrieved from http://search.proquest.com/docview/216799500?accountid=458