[December 15, 2014]

SHRM and Kronos Examine How Employee Absences Impact Organizations and Their Workforces Around the World1

Kronos Incorporated today released a study that examines the total impact employee absences have on organizations and their workforces around the world. The study explored the many residual effects that employee absences have on an organization, including how they affect co-worker and supervisor productivity, the use of replacement workers and overtime to cover absences, direct and indirect costs of paid time off, and the importance of policies and procedures to manage employee absences.

The research was commissioned by Kronos (News - Alert) Incorporated and conducted in collaboration with the Society for Human Resource Management (SHRM).

News Facts

• The total cost of paid time off as a percentage of payroll, when accounting for both direct and indirect costs, ranged from 20.9 to 22.1 percent in the U.S., 32.8 to 34.0 percent in Australia, and 36.3 to 38.3 percent in Europe.
• Unplanned absences have more negative effects on organizations compared to planned absences, as all of the countries/region studied, except China, cited additional workload and disrupting work of others among the top-three perceived effects of unplanned absences. "Increases stress" was also a top-three effect of unplanned absence cited in all countries/region except China and Mexico. In China, unplanned absences were perceived to "penalize or reflect badly on all in the group or team" and "reduce quality of work" on top of additional workload.
  • In a related "[email protected]" study by Towers Watson and National Business Group in 2013, nearly eight out of ten organizations cited stress as the top workplace health issue - more than smoking, poor nutrition, and employee obesity. In the same survey, employees named inadequate staffing as their top source of stress.
• Employee absence appears to affect colleagues the most, as perceived co-worker productivity loss ranged from 24.0 percent in Europe to 40.3 percent in Mexico, while perceived supervisor productivity loss ranged from 15.7 percent in the U.S. to 26.0 percent in Mexico.
  • Specifically in the U.S., unplanned absences add to workload (69 percent), increase stress (61 percent), disrupt work of others (59 percent), and hurt employee morale (48 percent).
• The majority of organizations around the world continue to accept written requests via e-mail or paper form for time-off requests, and many still use homegrown systems, manual spreadsheets, or paper timesheets to manage and enforce time-off policies:
  • Although the majority of responding organizations reported they used an electronic timekeeping system to track absences (i.e., automated third-party software or an integrated system as part of a human resource information system (HRIS)) more than two-fifths of responding organizations in China continued to use a homegrown system, manual spreadsheets, or manual timesheets/punch cards; about one-third reported the same in the U.S. and Europe, and one-quarter in Australia, India, Mexico, and the Europe region;
  • India was the most progressive in tracking requested time off by using electronic timekeeping systems (45 percent vs. 14-29 percent in the U.S., China, Australia, Europe, and Mexico), and had the highest usage of an integrated HRIS to track employee absences (41 percent);
  • Mexico and Australia led the way for using automated third-party software to track employee absences (51 and 48 percent, respectively);
  • An employee's direct supervisor was most likely to be responsible for enforcing attendance policies in the U.S. (57 percent), Australia (69 percent), and Europe (44 percent), while HR staff were most likely to be responsible in China (49 percent), India (60 percent), and Mexico (50 percent).
• The U.S. and Mexico tied for the average total number of workdays per year at 289; China reported the fewest at an average of 257 total workdays, and Europe just 269 total workdays.
  • While U.S. organizations in general provide fewer paid days off than other parts o the world, they tended to be the least likely to track employee absences (83 percent), compared with 95 percent of organizations in Mexico, which was the next least likely to track employee absences;
  • Across all of the countries/region studied, between six and 42 percent did not have a formal, written attendance policy in place depending on employee type (e.g., exempt vs. nonexempt); the U.S. tended to have a higher percentage of organizations that indicated they did not have a formal, written attendance policy in place than the other countries/region studied (30-42 percent vs. 6-33 percent)
  • About two-thirds of U.S. organizations reported they had a formal, written attendance policy depending on employee type.
• Overtime - another driver of the direct costs of employee absences - was used to cover 20 to 47 percent of employee absences in 2013 in the countries/region studied, with the lowest rate among responding organizations in China and the highest rate among organizations in the U.S.
• Overall, the use of replacement workers to provide coverage for at least some employee absences in 2013 varied greatly across the countries/region studied:
  • Organizations in Mexico were least likely to report using replacement workers to cover employee absences (30 percent vs. 46 to 69 percent); the U.S. (69 percent) and Europe (73 percent) tended to be the most likely to use replacement workers;
  • Average productivity loss due to replacement workers ranged from 20 percent in Australia to 31 percent in the U.S.

• Joyce Maroney, director, The Workforce Institute at Kronos
  "All workers need time off for a variety of reasons - from vacation time to relax, sick time to recover, and time needed to address the unexpected emergencies of life. However, the impact that absences can have on co-workers is a factor that should not be overlooked when examining the impact of absenteeism. The 2013 Towers Watson and National Business Group study showed that employees say inadequate staffing is the number one cause of workplace stress. By accurately tracking absences and the trickle-down effect they have on the entire business, organizations can improve productivity and minimize compliance risk while addressing issues that may increase the rates of absence to improve team cohesiveness and morale."

• Evren Esen, director of survey programs, SHRM
  "Employee absences carry hidden costs that significantly affect an organization's productivity and revenue - in fact, 75 percent of respondents perceived absence has a moderate to large impact. The more accurately employee absences are tracked and managed, the more effectively organizations can monitor, plan, and budget for this expense. The impact to the bottom line of the business can be substantial, making it pertinent that organizations have a strategy to effectively track the costs associated with employee absence."

Supporting Resources

• Note to editors: Cite survey as "Total Financial Impact of Employee Absences" study commissioned by Kronos Incorporated and conducted in collaboration with SHRM.
• Visit Total Financial Impact of Employee Absences Across the United States, China, Australia, Europe, India, and Mexico to download the full report.
• About SHRM.
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• Take a look at the lighter side of workforce management in our Time Well Spent cartoons.

About Kronos Incorporated

Kronos is the global leader in delivering workforce management solutions in the cloud. Tens of thousands of organizations in more than 100 countries - including more than half of the Fortune 1000^® - use Kronos to control labor costs, minimize compliance risk, and improve workforce productivity. Learn more about Kronos industry-specific time and attendance, scheduling, absence management, HR and payroll, hiring, and labor analytics applications at www.kronos.com. Kronos: Workforce Innovation That Works^™.

About the Society for Human Resource Management

Founded in 1948, the Society for Human Resource Management (SHRM) is the world's largest HR membership organization devoted to human resource management. Representing more than 275,000 members in over 160 countries, the Society is the leading provider of resources to serve the needs of HR professionals and advance the professional practice of human resource management. SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China, India and United Arab Emirates. Visit us at shrm.org and follow us on Twitter (News - Alert) @SHRMPress.

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Footnote 1: The Total Financial Impact of Employee Absences Study examined the impact of employee absences in the United States, China, Australia, Europe, India, and Mexico. The research was conducted online in the spring of 2014 by SHRM, and a total of 1,280 organizations responded from the countries/region surveyed.

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