Description
Average wage cost of absenteeism per full-time equivalent employee.
Formula
Absence days * Direct wage daily / FTE
Interpretation
Compensation Value of Unscheduled Absences per FTE serves as a proxy for the financial cost of unscheduled absences. The measure totals the daily wages for employees who were absent, multiplied by the number of days they were absent for unavoidable reasons.
For example, a result of $500 means that the wage costs of employees’ absenteeism, spread across all employees, averaged $500 per employee. Put differently, a result of $500 means that during the period, the organisation paid $500 per FTE in wages for absenteeism.
For the purposes of this measure unscheduled absences means absences that are beyond the capacity of the employer to control, including sick leave, carers leave, compassionate leave, parental (maternity) leave, jury duty, no-shows or other reasons. Leave for these reasons is often characterised as unscheduled, but on occasions an employee may advise of a need to take leave in advance.
In some positions, such absences may cause very little disruption. However, in other positions, unscheduled absences may drive extensive direct costs and productivity losses for the organisation.Direct financial consequences may include such costs as overtime wages and temporary worker pay.
Productivity losses can include the time used to find replacements, disruption to the delivery of services, training and onboarding of replacements, and the lost productivity of peers who may step in to cover the absent employee’s duties.
Because there are multiple types of costs that may result from absenteeism, this measure offers only an approximate indication of cost. It is difficult to quantify the lost productivity costs of managers, co-workers and replacement staff, and this measure can provide a more easily measurable indication of costs than totalling actual costs.
Another limitation of this measure as a proxy for the cost of absenteeism is that financial and productivity costs of absence are not necessarily positively correlated with wage costs.
On the contrary, many highly paid employees are those whose work will ‘wait for them’ and do not require much replacement labour or peer coverage.
Severe absence disruptions may be more likely to be driven by manufacturing line positions, call centre positions or other operational employees whose absence is more immediately felt by peers or customers.
Data Sourcing
Organisations typically source data related to absenteeism from absence tables that are part of timekeeping or payroll systems, or that exist as separate databases. Wage information may be sourced from payroll tables for greatest accuracy.
As an alternative, an employer could approximate wage information from an annual salary or hourly wage field within an HRIS job table.
Analysis
Employers may find it useful to analyse Compensation Value of Unscheduled Absences per FTE across various employee populations to identify areas of concern and targeted interventions, using such dimensions as age, tenure, employment level, pay grade, job family, performance rating, location and organisational unit.
Limitations
Compensation Value of Unscheduled Absences per FTE is only an approximate measure of the cost of absences to organisations, as described more fully in the Interpretation section. Also, the measure does not indicate the average length of absences or the reasons for those absences.
Targets
Employers are likely to set absolute targets for this measure near zero, though zero itself is not a realistic target. Despite an organisation’s best efforts to reduce absenteeism, sick leave and some other leave types will never be eliminated.
Certainly, health and safety efforts may aim to improve employees’ health and minimise sick time, and employers should aim to minimise or eliminate no-shows and false illnesses. However, targets should be set based on a realistic expectation of such absences.
Relative to a benchmark group, organisations would typically aim to move results toward the 25th percentile, representing lower levels of absenteeism costs, assuming the measure provides an adequate proxy for absence costs.