In our last newsletter, you were able to read about the risks of absenteeism in business acquisitions and the importance of gaining an understanding of your company’s situation to avoid nasty financial surprises. This article is also available on this website: https://krollerboom.com/verzuim-en-bedrijfsovernames/

Because the topic of absenteeism can have a major impact on both the financial health of an organization and the sustainable employability of all your employees, we want to highlight this topic from different angles in the coming period.

In our absenteeism cost trilogy, we will tell you more about absenteeism costs and show you that with the right approach, you can go from insight to results. We call that “Strategic Absence Management.

In 3 consecutive articles, we will tell you more about:

1) Costs and financial risks associated with absenteeism
2) Savings opportunities in absenteeism
3) Approach and design of absenteeism infrastructure: what to look out for?

In this first article in our series of 3, we tell you more about the financial impact of absenteeism and why it’s important to understand it.

Part 1 of 3: Costs and financial risks in absenteeism

Count in euros instead of percentages

It is important to be aware of all absenteeism costs. We talk about costs, where many organizations when it comes to absenteeism measure and manage from a percentage. However, you will get a better idea of the total (expected) cost if you convert the percentage into euros and then calculate this for future years.

The average cost per day of absence per employee quickly rises to €300. Thus, in an organization of 100 employees with a continuous absence rate of 5%, that is a total financial loss of €1,500 per day and thus a staggering amount in absence costs per month and per year. And if you have absentee employees who earn more than an average wage, the total naturally picks up even higher.

Types of costs

Some costs of absenteeism are immediate and can be reasonably factored in. Other costs, and the risks of those costs occurring, are a lot more erratic in terms of the level of costs and are much harder to predict. As a result, overall costs can spiral out of control unnoticed, despite current absenteeism rates, for example, giving little cause for concern.

Only when you include all possible costs associated with absenteeism do you have a complete picture to work with. We can roughly divide these costs into 3 groups:

• costs during the first 104 weeks,
• the costs that become apparent only in the longer term and
• the risks of -more sudden- additional costs.

We would like to explain these different groups of absence costs to you below:

+ Costs during first 104 weeks of absence

These are costs that can usually be reasonably estimated, and if your absence and payroll records are in order, these costs are relatively easy to identify. These are continued sick pay, known as direct absenteeism costs. This also includes indirect costs for the health and safety service, interventions during reintegration, replacement of your sick employee, productivity loss due to absenteeism and the time spent by HR staff and managers on absence counseling.

Less easily measured is the loss of productivity of still-not-sick employees, when attrition is imminent or when the workload has increased because colleagues are absent. When employees have not yet dropped out, but are also no longer 100 percent productive, we talk about “presenteeism. Several studies show that presenteeism can be more costly to an employer in terms of costs than the absenteeism itself.

Finally, you may have dealt with an employee who left sick in the first 104 weeks and received sick pay. Depending on the size of your organization and whether and how you are insured as an employer, all or part of these charges and any premiums are allocated to you. In that case, as an employer, you have already said goodbye to an employee. But for a long time to come, the costs will remain at your expense.

+ Long-term costs:

In the Netherlands, great responsibilities lie with the employer regarding sick employees. Even if the reason for the absence arose in the private sphere, the employer bears the responsibility. Not only the first 104 weeks, but in the case of WGA benefits, also the 10 subsequent years.

The costs for the WGA do not always reveal themselves immediately, but, if you are publicly insured, only become visible over time. In total, the costs of incapacity for work can be enormous and be your responsibility for another 10 years through the work resumption fund (Whk).

But even if you are privately insured, you may face premium increases. Do you have a picture of this risk within your own organization?

+ Sudden costs

Finally, we explain a category of costs that are the most difficult to predict but, on the other hand, the easiest to prevent.

Do you know when and where to report what? With absent (former) employees, you may have to deal with such things as sick reports, recovery reports, sick-out reports, notification of long-term disability or requests for services around reintegration. Late or incorrect reporting can result in a fine or cause a missed opportunity to reduce your costs.

Perhaps best known, and infamous, is the wage penalty that the UWV can impose on an employer when applying for WIA. In about 10% of WIA claims, the UWV imposes it on an employer. The sanction is always one year of continued pay and (costs for) the reintegration of the employee in question. Therefore, make sure you are aware of the risk of wage sanctions in your long-term absence files and know what you can do to prevent them.

Just Brief & Succinct:

This article covered the various groups of costs associated with absenteeism, ranging from fairly predictable to much less predictable.

It is crucial to fully understand and control absenteeism in order to reduce and influence costs. Because even a single case of absenteeism where opportunities for reintegration are not taken advantage of or mistakes are made can result in significant financial consequences.

In our next newsletter (number 2 of this trilogy), we will take a closer look at ways to reduce these absenteeism costs and go over with you what savings opportunities are available. Sign up to receive our newsletter.

Our specialists are happy to help you in the areas of strategic HR policy, absence management, social security, integrated health policy, health and safety services and sustainable employability.

Contact the specialists on the Kröller Boom Corporate Wellness team: corporatewellness@krollerboom.nl