Absenteeism: A recurring headache for businesses

72% of municipal employees in the Italian commune of San Remo regularly leave their workstation. According to a survey conducted a few months ago by the local police, one of the 196 employees guilty of frequent irregularities saw fit to go canoeing during a work shift – while filing for overtime pay! 
 
For Swiss companies, the situation is certainly not as dramatic. The annual absenteeism rate in Switzerland is estimated at roughly 3.8% of working hours, or 8.3 days of absence per employee. Three-quarters of these absences are due to illnesses and accidents, while the remaining amount consists equally of military and civilian service and maternity leave.
 
Nevertheless, absenteeism generates a direct annual cost of more than 4 billion francs to the Swiss economy, according to a study commissioned by the State Secretariat for Economic Affairs. This cost increases considerably if account is taken of employees close to termination because of conflictual relationships with employers or who suffer a serious loss of motivation and engage in “presenteeism” without added value for the company. 
 
Added to the direct costs, which include paying the absent employee’s salary, recruiting, training, and paying the substitute’s salary, are the indirect costs of productivity loss, team disorganisation, delays, and the deterioration of working conditions. Ultimately, the indirect costs of absenteeism in Switzerland amount to between three and five times its direct costs. It should be noted that the reasons for absences are relatively differentiated in terms of the age of employees. Younger employees are absent for short periods, usually for reasons related to motivation or conflictual situations, while older employees are absent for longer periods due to health issues or difficulty continuing work. This last factor is a key element of the problem. Indeed, the sectors of activity most affected by absenteeism are manual labour professions and the service and healthcare sectors. 

Overview

8,3

The average number of days of absence per employee in Switzerland according to the Federal Office of Statistics.

160’000

The direct annual cost of absenteeism for a company of about sixty employees, in Swiss francs, according to Promotion Santé Suisse, in addition to the annual indirect costs, estimated at 320,000 francs.

4,2

The annual cost of absenteeism to the Swiss economy, in billions of francs, according to a study by the State Secretariat for Economic Affairs.

 
 

Absences lead to more absences

To prevent absences and implement an action plan for improving health and well-being in businesses, it is essential to carry out an accurate monitoring of absences. First, a distinction must be made between long-term absences (over 30 days) and short-term absences (less than 30 days). In a company considered healthy, a balance in terms of cumulative days should be reached between these two categories. However, this is not the only relevant indicator since it is also necessary to understand the changes in absences and their average duration. 
 
A Director of Human Resources (HRD) must be able to analyse the key absenteeism figures in his or her business by sector, by profession, and by team leader, in real time using trend charts, while comparing them over time. 
 
Using these indicators, the HRD is then able to take the pulse of the business and to prepare a genuine collective remedy by combining the figures with the information collected from various team leaders. In preventing absences, it is essential for these team leaders to be trained in the conduct of their employees by following simple but highly effective rules for the welfare of employees. In addition, there are many executive coaching courses which seem to have become a necessary part of the career path of any person working in management today. 
 
In the context of absence management and prevention, it is necessary to keep in mind the paramount importance of keeping in regular contact with ailing employees. That way, the person will maintain contact with the professional world, and feel like he or she is receiving assistance during recovery.  
 
Communication about restructuring measures during work periods in smaller teams must also be clear, and special care should be taken not to demotivate the present employees. This because, as is often said, absences lead to more absences. 
 

A return interview must also be scheduled when the employee returns to explain to him or her, what kind of work was carried out during his or her absence and new ongoing projects.

Managing absences in businesses can be summarised in five steps:

  1. Preventing absences

  2. Managing absences

  3. Mastering absences

  4. Transferring the financial risk related to absences

  5. Follow up after the employee’s return

Companies can be covered

In terms of the transfer of financial risk, there are a number of different models worth studying.  For accidents the system is relatively simple because the transfer of risk and returns is governed by accident insurance law. Only additional benefits may be freely agreed through supplementary accident insurance. 
 
Regarding the loss of income in the event of an illness, conditions are more complex since there are three main models. The first model is based on a full transfer from an insurer once the pre-defined waiting period has expired. As a consequence, each person absent more than 14 days, 30 days, or 60 days is declared to an insurance company’s claims department. This department handles financial issues and monitors illnesses through contacts with doctors with the goal of returning the employee to work. 
 
The second model is based on a system known as “stop-loss”. This type of contract is based on the excess that is paid by the company. This excess is defined by the cost of absences during previous years. If this cost exceeds the amount of the excess, the insurer provides compensation for the surplus. 
 
It is also possible to combine these two models by taking out a "stop-loss" contract for short- and medium-term absences, and transfer long-term absences to an insurer.
 
Finally, there is a self-insurance model that can be advantageous for large companies, enabling them to retain control of all aspects of employee’s absences. Companies that opt for this model can track the conditions of employees through a chosen medical facility (which guarantees medical confidentiality) and the wage costs of absent employees will be imputed directly. It should be kept in mind that self-insurance involves paying social security contributions toward all salaries of absent workers. 
 

By contrast, daily insurance indemnities are exempt from social security contributions in the first two models. That way, the final cost is reduced by an average of about 20%.

 

Assisting the return to work

Given the financial challenges, the choice of model for each business should not be made lightly. Actuarial offices may be referred to as they are able to produce accurate studies of how to advise companies, particularly in regard to retention rates. As such, an actuary working together with an insurance adjuster can be a valuable guide to achieving potential savings by capitalising on the fact that an individual study performs better compared to collective study for an insurance company. 
 
Finally, it is important to talk about an employee's return to work. Putting someone back to work, particularly after long absences, requires certain precautions. 
 
An employee returning from a long illness needs time and consideration to return to the pace of professional life. Tools such as therapeutic resumption should be used. The purpose of this resumption is not to seek a person’s immediate return, but to allow that person a period of readjustment. In many cases, therapeutic resumption is compensated by insurance providers, since it is part of the illness and doing so helps prevent the risk of relapse. 
 
Admittedly, the issue of absenteeism is complex, and the only way to bring concrete solutions to companies is to control the organisation of all stakeholders.

 

 
Yvan Roux
Corporate Clients Director
Article published in march 2016