Total Financial Impact of Employee Absences in the U.S

Executive Summary Total Financial Impact of Employee Absences in the U.S.

Data Highlights from the DEFINITION Total Financial Impact of For the purpose of this research, employee absences were defined as paid days off offered per full-time employee in 2013, including 1) Employee Absences Survey vacation and personal time off, 2) sick time off, 3) paid time off Direct Costs of Paid Time Off as a (PTO), and 4) other paid time off, such as for bereavement, parental and civic needs. Costs associated with unpaid time off, including Percentage of Payroll: The total direct those associated with the Family and Medical Leave Act (FMLA), are cost of employee paid time off, accounting not included in the calculations. for wages/salaries, overtime costs and replacement worker costs, was 15.4% as a percentage of payroll. The direct cost Introduction of total paid time off offered in 2013 as a The direct cost of total The Total Financial Impact of percentage of payroll was 8.1%. Overtime paid time off offered as a Employee Absences Survey, produced costs were 5.7% as a percentage of percentage of payroll was in collaboration with and commis- payroll, whereas the cost of replacement sioned by Kronos, Incorporated, 8.1% in 2013. workers, such as temporary employees, was designed to measure both the was 1.6%. direct and indirect costs of employee replacement workers, and productivity absences, including costs associated Indirect Costs of Paid Time Off as a loss of co-workers and supervisors were with payroll, replacement workers, Percentage of Payroll: The indirect also measured. Methods organizations overtime and productivity loss. cost of total paid time off offered in 2013 use to track employee absences and their accuracy are also discussed. The was based on three types of productivity Organizations should consider the more accurately employee absences are loss: productivity loss due to replacement direct costs in payroll when calculat- tracked and managed, the better orga- (22.6% to 36.6%, depending on type of ing the cost of employee absences, as nizations can monitor, plan and budget absence), co-worker productivity loss well as the impact of indirect costs, for these absences. (29.5%) and supervisor productivity loss such as those associated with produc- (15.7%). When considering all three types tivity loss. Organizations may not be 1. Cost of Employee Absences of productivity loss, the average total cost able to track these costs, or find it of productivity loss as a percentage of very difficult to do so. However, given Average Rate of Paid Time Off payroll was 6.2%.1 the impact to the bottom line of the To determine the average rate of paid business, it is pertinent that organiza- time off among surveyed organizations, Total Costs of Paid Time Off as a Per- tions track all costs associated with the survey assessed the following for centage of Payroll: When considering employee absences. This study identi- one calendar year: the total number both the direct and indirect costs of paid fied the various costs associated with of paid days off offered to full-time time off, the total cost as a percentage of employee absences, including direct employees and the total number of payroll was between 20.9% and 22.1%. and indirect costs to organizations for workdays.2 The average total number This makes tracking paid time off pertinent unplanned, planned and extended paid of workdays reported by organizations in not only ensuring consistent treatment time off. Direct costs, such as wages/ was 289. 3 The average rate of paid sick of employees, but also controlling costs salary earned during an employee time offered to full-time employees was associated with paid absences. absence, overtime costs and replace- also calculated to determine the costs ment worker costs, were calculated as associated with paid sick time offered a percentage of total payroll. Indirect as a percentage of payroll. The average costs due to lower productivity of rate of paid time off as a percentage of 2 Executive Summary: Total Financial Impact of Employee Absences in the U.S.

total workdays across all of the orga- time pay rate and the total payroll, the Employee absences are linked to lowered nizations surveyed was 8.1%,4 whereas total cost of overtime due to absences as organizational productivity, an indirect the average rate of paid sick time off a percentage of payroll was 5.7%.10 cost that must be accounted for to cal- was 3.5%.5,6 culate an accurate total cost of absences. Table 2. Direct Costs of an Absence as a Percentage The impact of employee absences on Direct Costs of Paid Time Off for Full-Time of Payroll productivity and revenue was measured Employees using several survey items, including All paid time off (n = 277) 8.1% The direct costs of paid time off were an overall question on the impact of calculated by summing three costs Overtime costs (n = 277) 5.7% absences on organizational productivity associated with employee absences as a Replacement workers (n = 148) 1.6% and revenue, co-worker and supervisor percentage of payroll: All direct costs 15.4% productivity loss, productivity loss due to replacement by type of absence, and (Cost of payroll* + Cost of overtime supervisory hours spent dealing with Replacement Costs + Cost of replacement workers) absences. Responding organizations Replacement costs refer to costs associ- Total payroll for full-time were also asked to identify other effects ated with using temporary workers, employees in the organization of unplanned absences on their organi- outside contractors or other additional zation. Three-quarters of respondents *Base salaries/wages workers (excluding existing employ- (75%) perceived employee absences have ees) to provide coverage for employee a moderate to large impact on productiv- Payroll Costs absences. A previous SHRM study ity and revenue.13 In addition, employees The direct cost of total paid time off on contingent workers was used to with supervisory responsibility spend an offered as a percentage of payroll was determine the ratio of the use of average of 4.2 hours per week14 deal- 7 8.1% (see Table 1). The direct cost of replacement workers based on the type ing with absences, including obtaining total paid sick time as a percentage of of absent employee.11 This study found replacements, adjusting workflow or payroll was 3.2%; this number is impor- that the highest percentage of contract providing training, which is equivalent tant to many organizations in order to or temporary workers was used to to 210 hours, or 5.3 weeks, per year per plan for and control the costs associ- cover absences of nonexempt employ- supervisory employee for organizations ated with paid sick time. ees (75%). Given the previous finding that are open 50 weeks per year. of the current study that employee Table 1. Direct Annual Costs of Paid Absences Offered absences were covered by overtime for 75% of respondents perceived as a Percentage of Payroll 47% of absences within the respond- employee absences have a ing organizations and that 70% of the All paid time off (n = 277)* 8.1% employees in the responding organiza- moderate to large impact on Paid sick time off (n = 171) 3.2% tions were nonexempt (see Table 3), productivity and revenue. *All paid time off includes time off days offered to full-time employees in 2013 for 1) vacation and personal time off, 2) sick time off, 3) paid the assumption was made that approxi- time off (PTO), and 4) other paid time off, such as bereavement, mately 20% of absences were covered by parental and civic time off. replacement workers in 2013.12 Indirect Costs of Employee Absences Indirect costs of absences are typically attributed to three types of productiv- Overtime Costs Table 3. Percentage of Employees Eligible for Paid ity loss: possible lower productivity of a When employees are absent, co-workers Time Off, by Type of Employee* replacement worker (e.g., a temporary and supervisors are often required to Employees eligible for overtime pay 70% worker covering for an absent employee work overtime to cover for employee may not be as familiar with technol- Nonmanagement/individual contributor 15% absences. According to the Fair Labor employees** ogy used and will therefore be less Standards Act (FLSA), nonexempt productive), co-worker productivity loss Management/supervisory employees** 13% employees are entitled to overtime pay (e.g., a manufacturing employer may Executive employees** 1% equivalent to time and a half for any experience a domino effect as the entire * Data reported based on respondents/organizations who provided hours worked in excess of 40 in a work- line is slowed when a co-worker is less employee counts by type of employee. 8 week. Among the responding organiza- ** Employees not eligible for overtime. productive due to added responsibilities tions, overtime was used to cover 47% Note: n = 447. Percentages may not total to 100% due to rounding. during another employee’s absence), of employee absences.9 Using the total and supervisor productivity loss (e.g., number of absences covered by employ- 2. Impact of Employee Absences on supervisors are key to maintaining ees in overtime status, the average over- Productivity safety, quality and productivity of their Executive Summary: Total Financial Impact of Employee Absences in the U.S. 3

Table 4).15 Given the higher frequency The average productivity loss 72% of respondents indicated of unplanned absences compared with associated with an unplanned extended leave and the higher produc- they noticed a pattern of absence was the highest tivity loss associated with unplanned higher rates of unplanned (36.6%) and productivity loss absences, these absences may be the absences on Mondays related to a planned absence greatest cause for concern in terms of or Fridays, before public was the lowest (22.6%). controlling costs. On average, co-workers holidays, or before sporting or were 29.5% less productive when provid- reports; when they are in a back office national events. ing coverage for a “typical absence day;” obtaining replacements or adjusting supervisors were 15.7% less productive.16 workflow, their overall productivity In addition to productivity loss, par- suffers). Three types of absences were ticipants were asked to identify other considered to calculate indirect costs Table 5. Total Cost of Productivity Loss as a effects of unplanned absences (see due to productivity loss: 1) unplanned Percentage of Payroll Table 6). More than two-thirds (69%) incidental absences of up to five business indicated unplanned absences add to Unplanned absence 6.7% days (sick, bereavement, parental or civic the workload; about three-fifths said Planned absence 5.5% time off), 2) planned absences of up to these types of absences increase stress five business days (vacation or personal Extended absence 6.4% (61%) and disrupt the work of others time off), and 3) extended absences of Average 6.2% (59%), and almost half (48%) reported more than five business days. Note: n = 277. Indirect costs of absences as a percentage of payroll unplanned absences hurt morale. were calculated using productivity loss due to replacement worker by the type of absence, co-worker productivity loss, and supervisor productivity loss, overall average rate of paid time off, and payroll. Table 4. Types of Productivity Loss Measured Table 6. Impact of Unplanned Absence

Productivity loss due to replacement worker Adds to workload 69% Unplanned absence (n = 284) 36.6% Increase in Absences: Holidays, Weekends and Increases stress 61% Planned absence (n = 284) 22.6% Special Events Disrupts work of others 59% Extended absence (n = 279) 34.0% When respondents were asked whether Hurts morale 48% Average productivity loss (n = 277) 31.1% they noticed a pattern of higher rates Reduces quality of work 40% Co-worker productivity loss (n = 438) 29.5% of unplanned absences on Mondays Adds mandatory overtime 29% Supervisor productivity loss (n = 420) 15.7% or Fridays, before public holidays, or Note: Productivity loss due to replacement worker was calculated by before sporting or national events, 72% Requires additional training 20% type of absence: an unplanned absence, a planned absence or an 17 Penalizes or reflects badly on group/team 19% extended absence. indicated they noticed such a pattern. Given that unplanned absences typically Note: n = 512. Percentages do not total to 100% due to multiple response options. Productivity loss due to replacement cost organizations more in indirect costs varied by type of employee absence, with than planned absences do, it is perti- 3. Absence Management Policies and the average productivity loss associ- nent that organizations accurately track Practices ated with an unplanned absence being unplanned absences both to monitor About two-thirds of organizations the highest (36.6%) and the average costs and to counsel their employees on reported they have formal, written productivity loss related to a planned attendance policies when necessary. attendance policies in place (see Figure absence being the lowest (22.6%); the productivity loss due to replacement for an extended absence was 34.0% (see Figure 1. Attendance Policies by Employee Classification

Nonexempt (n = 216) 71% 18% 12% On average, co-workers Exempt (n = 213) 60% 23% 18% were 29.5% less productive All employees, if not known 58% 10% 32% by employee type (n = 150) when providing coverage for a “typical absence day;” Formal, written attendance policy Individual departments have their own informal policies or rules supervisors were 15.7% less No policy

productive. Note: Respondents who indicated “Don’t know” were not included in the analysis. Percentages may not total to 100% due to rounding. 4 Executive Summary: Total Financial Impact of Employee Absences in the U.S.

1). However, 12% indicated they do not have a formal, written policy for Figure 2. How Absences Are Tracked, by Absence Type nonexempt employees, and another Unplanned absences (n = 237) 25% 44% 18% 8% 3% 1% 18% reported they don’t have such a Planned absences (n = 234) 26% 43% 17% 10% 4% 1% policy for exempt employees; among respondents who were unable to differ- Disability/extended medial leave* (n = 236) 6% 23% 7% 44% 18% 2% entiate between nonexempt and exempt FMLA (n = 235) 5% 10% 15% 43% 22% 5% employees, 32% reported they do not have a formal, written attendance Employee self-reports in centralized system HR tracks in centralized system Supervisor tracks in centralized system HR tracks manually (e.g., in spreadsheet) policy. A formal, written attendance Supervisor tracks manually (e.g., in spreadsheet) Other policy both serves as a guideline for supervisors and helps ensure consis- *Excludes workers’ compensation Note: Only respondents whose organizations have a system to track employee time and attendance were asked this question. Percentages may not total tent practices across an organization. to 100% due to rounding. Participants were asked how their organization currently tracks employee employee absences were asked how they tracked using a) an integrated system as time and attendance. One-third (35%) track absences based on absence type. a component or module of an HRIS or indicated they use an integrated system For unplanned and planned absences, b) an automated third-party software, as a component or module of an HR participants were most likely to report approximately 30% indicated they track information system (HRIS) (see Table that supervisors track these types of financial liabilities for paid leave “very 7); this type of system enables time and absences in a centralized system (44% accurately.” Among those respondents attendance to be linked with pertinent and 43%, respectively) (see Figure 2); less who reported using a) manual spread- HR information to track costs associ- than one-quarter (23%) responded that a sheets or b) manual paper timesheets or ated with absences, such as rate of pay centralized system is used by supervisors punch cards, less than one-fifth indicated and total payroll. Just over one-quarter to track disability/extended leave, and their organization tracks these financial (29%) of respondents indicated they use one-tenth (10%) indicated the same for liabilities “very accurately” (18% and automated third-party software with FMLA leave. Both disability/extended 19%, respectively); just 9% of those who terminals or web entry, which typically medical leave and FMLA leave were most reported using a home-grown system allows an organization to track vaca- commonly tracked by HR in a central- indicated their organization tracks these tion and other types of absences, but is ized system (44% and 43%, respectively); financial liabilities “very accurately.” not integrated to track the dollar cost however, disability/extended leave and How employees request time off is also associated with each absence. Enforc- FMLA leave were tracked by HR manu- important in ensuring that absences ing attendance policies is complex, and ally in about one-fifth (18% and 22%, are tracked accurately. For example, the use of an integrated system may respectively) of organizations. requesting time off using a paper form make tracking the costs associated with employee absences more seamless. Disability/extended leave and FMLA leave were tracked One-quarter (24%) of Table 7. How Employee Time and Attendance Are by HR manually in about respondents think their Tracked one‑fifth of organizations. organization tracks financial Integrated system as a component or module of 35% liabilities for paid leave “very an HR information system (HRIS)* Among responding organizations accurately.” Automated third-party software with terminals 29% that reported time and attendance are or web entry Home-grown system 20% Manual spreadsheets 8% Figure 3. Person/Entity Primarily Responsible for Administering FMLA Leave

Manual paper timesheets or punch cards 7% Human resources staff 69% *i.e., a workforce management solution Employee’s supervisor or department manager* 20% Note: n = 240. Respondents who indicated “Not applicable, we do Outsourced to a leave administrator or disability carrier 10% not have such a system” or “Other” were not included in the analysis. Percentages may not total to 100% due to rounding. Other 1% *No formal designated administrator. Respondents who indicated their orga- Note: n = 486. Respondents who indicated “Don’t know” or “Not applicable” were not included in the analysis. Percentages may not total to 100% due to rounding. nization has a formal system for tracking Executive Summary: Total Financial Impact of Employee Absences in the U.S. 5

More than two-thirds (69%) of respon- awareness of, the costs (e.g., leave One-third (34%) of dents indicated HR staff administer administrators may be able to reduce respondents reported they FMLA leave (see Figure 3); one-fifth the time they spend on tracking costs, don’t know the approximate (20%) indicated the employee’s supervi- thus creating a cost savings). annual expense of sor or department manager takes on administering FMLA leave; this role. Given the importance, both Respondents were asked to provide more than one-third (36%) financially and legally, of accurately the approximate per-employee cost of their organization’s share of benefits of respondents reported they tracking FMLA leave, it is pertinent that organizations have someone for- continued during a typical extended don’t know how much it costs mally designated to administer FMLA FMLA leave. More than one-third to pay for employee benefits leave. In addition, some employees (35%) indicated the approximate cost during a typical extended take FMLA leave on an intermit- per employee is between $2,000 FMLA absence. tent basis, adding to the challenge of and $4,999; about the same ratio accurate tracking; approximately 16% of (36%) indicated the approximate cost per employee is between $500 and or via an e-mail may be more error- responding organizations indicated half $1,999.23 More than one-third (36%) of prone (e.g., the supervisor forgets to or more of FMLA leave is taken on an 21 respondents reported they don’t know enter the information into an electronic intermittent basis. how much it costs to pay for employee system), whereas using a time-keeping Data on the overall annual expenses benefits during a typical extended system that integrates with a central- 24 associated with administering FMLA FMLA-related absence. These find- ized system could lead to better track- leave for the overall organization ings may be an indication of another ing. (including dedicated staff time, opportunity for cost savings that can outsourcing expenses, legal support, be achieved by accurately tracking Two-thirds (66%) of respondents internal audits, etc.) were also collected these data. indicated employees in their organiza- (see Figure 4). More than one-quarter 5. What Do These Findings Mean for tion request time off by using a form or (27%) of respondents indicated the Organizations? sending an e-mail; one-quarter (24%) annual cost is between $10,000 and Managing the cost of employee submit a request using a time-keeping $19,999. Roughly one-fifth (21%) absences is the responsibility of busi- system, 9% request time off verbally, indicated the annual cost is between ness leaders in every region and every and 1% request time off some other $20,000 and $49,999; 9% reported industry. Understanding the driv- way.18 When asked how accurately they the annual cost is $100,000 or more. ers of absenteeism can also influence think their organization tracks financial One-third (34%) of respondents strategies for improving productivity. reported they don’t know the approxi- liabilities for paid time off, such as Because the use of contingent/tempo- mate annual expense of administering vacation or sick day accruals, only one- rary workers is one of the main ways FMLA leave.22 Automation of tracking quarter (24%) of respondents indicated organizations deal with absences, espe- the costs associated with administering they think their organization does so cially for nonexempt positions, a lack FMLA leave could reduce, and increase “very accurately;” more than one- of clarity around the costs and drivers half (56%) indicated they think this is of absences may lead to an overreliance done “reasonably accurately,” and 21% Figure 4. Approximate Annual Expense of on contingent workers. In addition, Administering FMLA Leave* responded “not very accurately.”19 there are many legal issues related to employee absences, so a clear strategy Less than $5,000 16% and policy to address this issue can 4. Family and Medical Leave Act (FMLA) $5,000-$9,999 13% help protect against liability. In organizations with 50 or more $10,000-$19,999 27% employees within a 75-mile radius, the 21% $20,000-$49,999 Tracking Absences and Their Impact on FMLA entitles eligible employees of $50,000-$99,999 14% Productivity covered employers to take unpaid, job- $100,000 or more 9% A business leader’s first responsibil- protected leave for specified family and *Including dedicated staff time, outsourcing expenses, legal support, ity in regard to employee absences is medical reasons, with continuation of internal audits, etc. to ensure that the organization has Note: n = 309. Respondents who indicated their organization is not group health insurance coverage under required to comply with the FMLA were not asked this question. practices in place that accurately track the same terms and conditions as if the Percentages may not total to 100% due to rounding. Respondents who and measure the cost of absences. By indicated “Don’t know” were not included in the analysis. employee had not taken leave. 20 accurately quantifying the full impact 6 Executive Summary: Total Financial Impact of Employee Absences in the U.S.

the problem. For example, some orga- care, manufacturing and educational For many organizations, nizations may be able to reduce absences services, as well as retail and other one of the key costs by implementing wellness programs service sectors, where the reliance of employee absences that help employees deal with health on replacement workers or employee is the use of temporary issues and stress. Recent research from overtime to fill the gaps is common. /replacement workers and the Organisation for Economic Co- In addition, monitoring employee absences enables business leaders to overtime in place operation and Development (OECD) compiled by The Economist finds that account for indirect costs (e.g., pro- of employees who are longer working hours can actually be ductivity loss) and helps organizations not at work. detrimental to productivity.25 Many detect employees who have excessive organizations find that more flexible unplanned absences so that they can be counseled to ensure they are only tak- of absenteeism, organizations can better work practices have an important posi- ing the paid days off to which they are understand the value of solutions that tive impact on reducing absences as well entitled. Tracking employee absences can reduce the costs and lost time from as improving productivity. also enables paid accrual days to be employee absences. Processes that track Attendance/Absence Policies accounted for in the overall budget. the cost of absenteeism must include not This survey found that although the only the direct costs of absences, such majority of organizations have formal In summary, a clearly defined strat- as salaries and replacement worker costs, attendance policies in place, some do egy to monitor and manage absence, but also the indirect costs involved, such not. Organizations without a formal with proper training and automation, as reduced employee morale. Indeed, attendance policy are generally encour- can help control costs associated with the impact on employee morale is prob- aged by HR and legal experts to develop absences and improve the bottom line. ably one of the most underappreciated one—for a number of reasons. First and costs of employee absences. Absentee- foremost, having a formal attendance 6. Respondent Demographics ism is clearly a key driver of inadequate policy in place both serves as a guideline staffing and thus may result in rising for supervisors and helps ensure consis- employee stress levels. Poor manage- Table 8. Job Title tent practices across an organization. By ment of employee absences can lead to using a system to track the use of paid Director or assistant/associate director 56% a vicious cycle of rising stress levels that time off and accruals, supervisors and Vice president, chief of HR or above 22% negatively affect employee health and HR can track and budget for paid time Manager or generalist 14% morale and lead to even more days of off more accurately. In addition, without work missed. a formal attendance policy in place, Administrator or coordinator 2% there is the potential for legal liability to Specialist 2% Without accurate tracking of absences organizations. The risk is that varying Supervisor 1% and their impact, organizations may not practices among different managers and Analyst 1% know the real cost associated with their employees could give rise to perceptions Other 3% strategies of addressing absenteeism. of favoritism that could potentially leave For many organizations, one of the key employers vulnerable to costly legal Note. n = 727. Percentages may not total to 100% due to rounding. costs of employee absences is the use action or damaged employee morale. of temporary/replacement workers and overtime in place of employees who are The range of laws that relate to Table 9. Primary Work Function not at work. Addressing the issues that employee absences demonstrate just Human resources 63% tend to increase the rates of absences how complex managing this issue can Employee benefits 39% rather than relying on temporary help be for organizations and their HR to make up the shortfall can therefore departments, thus making the use of a Staffing/employment/recruitment 30% be a real boost to productivity and the system to track both paid and unpaid Executive 28% bottom line. time off beneficial. Compensation 27% Finance/accounting/payroll 15% Investigating the underlying causes of Given the total costs associated with absences can be complex, and finding employee absences, it is pertinent that Operations 14% solutions can sometimes involve pro- organizations are able to accurately Other 9% grams and practices that do not appear track current and future absences, Note: n = 733. Percentages do not total to 100% due to multiple at first glance to be directly related to particularly in industries such as health response options. Executive Summary: Total Financial Impact of Employee Absences in the U.S. 7

ing a link to the online survey was sent frequency of use of overtime (3.12, n = Table 10. Organization Staff Size to all sample members. The survey URL 368), which converts to 47%. 1 to 99 employees 11% was also promoted to Kronos constituents 10Overtime costs were calculated using through social media channels. During 100 to 499 employees 24% the total number of absences covered the data collection period, several e-mails by employees in overtime status, 500 to 2,499 employees 47% reminders were sent, and a small incentive average rate of paid time off, total 2,500 to 24,999 employees 16% was offered to increase the response rate. number of workdays, total number 25,000 or more employees 1% of employees and an average over- Note: n = 495. Percentages may not total to 100% due to rounding. 8. Endnotes time use rate of 47%. The calculation 1 ((Sum of three types of productivity for overtime assumes the overtime loss due to employee absence) employee worked a full extra workday in a co-worker’s absence. Table 11. Organization Industry *(Average rate of paid time off *Total payroll)) (Total number of absences Health care and social assistance 16% Total payroll covered by employee in overtime Agriculture, forestry, fishing and hunting 13% 2Workdays include the number of days status * Overtime rate) Manufacturing 12% the organization is open for business Total payroll Educational services 11% (e.g., if an organization is open five 11Society for Human Resource Man- days per week and is closed on 10 of Government agencies 8% agement. (2011). Staff Levels and those days to observe federal holidays, Professional, scientific and technical services 5% the Use of Contingent and Part-time the calculation would be: (52 * 5) – Workers SHRM Poll. Retrieved from Finance and Insurance 5% 10 = 250). http://www.shrm.org Retail trade 5% 3 n = 504. 12Replacement costs were calculated Accommodation and food services 4% 4n = 411. using the total number of absences Transportation and warehousing 2% covered by replacement workers, aver- 5n = 250. Arts, entertainment and recreation 2% age rate of paid time off, total number 6 Wholesale trade 2% Based on the number of paid sick of workdays, total number of employ- days offered per full-time employee, ees and an average replacement use Religious, grant-making, civic, professional and 1% similar organizations on average, in 2013. Paid sick days rate of 20%. Using the total number reported as part of paid time off of absences covered by replacement Utilities 1% (PTO) days offered are not included in workers, the average hourly wage of Construction 1% this analysis. replacement workers and total payroll, Information 1% the total cost of replacement workers 7The direct cost of total paid time off as Administrative and support and waste as a percentage of payroll was 2%. 1% a percentage of payroll was calculated management and remediation services by dividing the organization’s total 13Respondents who indicated “Don’t Real estate and rental and leasing 1% annual direct cost of paid time off know” were not included in the analysis. Mining, quarrying, and oil and gas extraction 0% offered by the total payroll for full-time 14n = 345. Only respondents who employees. Repair and maintenance 0% indicated employees with supervisory Personal and laundry services 0% (Average rate of paid time off * Total responsibility spend 0 to 10 hours on Other industry 8% annual payroll for full-time employees) absence-related tasks were included in Note: n = 673. Percentages may not total to 100% due to rounding. Total payroll for full-time employees the calculation. in the organization 15Question asked in survey: “Typically, 7. Methodology 8U.S. Department of Labor. (n.d.) when an employee absence is covered The Total Financial Impact of Employee Wages: Overtime Pay. Retrieved from by another worker, how productive are Absences Survey, conducted by the http://www.dol.gov/dol/topic/wages they compared to the normal pro- /overtimepay.htm ductivity of the employee for whom Society for Human Resource Manage- they are covering?” Only respondents ment (SHRM) in collaboration with 9The total number of absences covered who reported a “large” or “moderate” by overtime was calculated to deter- and commissioned by Kronos, Incor- impact of employee absences on their mine the costs associated with the use porated, collected responses from 733 organizations’ productivity and revenue of overtime. Based on frequency of use SHRM members, Kronos customers were asked this question. Percentages of overtime, the direct costs of over- may not total to 100% due to rounding. and Kronos prospects. time were calculated. A numerical value was assigned to each response option 16Question asked in survey: “On a The survey was fielded from April 10 to determine the weighted average of typical absence day, approximately how through May 30, 2014. An e-mail includ- the Likert scale used to measure the much time is used by co-workers and/ 8 Executive Summary: Total Financial Impact of Employee Absences in the U.S.

or supervisors to provide coverage for 23n = 309. employee absence?” 24Note that this percentage is based on 17n = 182. all respondents; results of the analysis discussed previously on per employee 18n = 225. expenses associated with administering 19n = 225. FMLA do not include respondents who 20U.S. Department of Labor. (n.d.). indicated “Don’t know.” Leave Benefits: Family & Medical 25C.W. & A.J.K.D. (September 24, Leave. Retrieved from http://www.dol. 2013). Get a life. The Economist blog. gov/dol/topic/benefits-leave/fmla.htm Retrieved from http://www.economist. 21n = 401. com/blogs/freeexchange/2013/09/ working-hours. 22Note that this percentage is based on all respondents; results of the analysis discussed previously on annual expenses associated with administering FMLA do not include respondents who indicated “Don’t know.”

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