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Tracking True Cost of Lost Productivity Remains a Challenge

Large, sophisticated employers are struggling to track and measure how much the lost productivity resulting from employee absences and presenteeism costs their companies.

September 17, 2012
Related Topics: Workforce Analytics, HR Technology, Performance Management Systems, Policies and Procedures
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Poor worker health and related productivity losses cost U.S. employers $576 billion annually, including workers compensation, disability and group health program expenses, according to research released last week.

But large, sophisticated employers are struggling to track and measure how much the lost productivity resulting from employee absences and presenteeism costs their companies. Presenteeism occurs when employees are at work, but not performing at their peak, perhaps due to illness.

Employers want to measure the impact of absence on productivity because they believe the losses significantly affect their company profitability, observers said.

"It all boils down to the bottom line," said Kimberly Mashburn-Lee, vice president of strategic client solutions for Pacific Resources Benefits Advisors L.L.C., a Chicago-based employee benefits advisory company. "If your employees are not at work and they are not productive, the bottom line is going to be affected dramatically."

But several complications prevent employers from adequately tracking and measuring employee absence and productivity losses. They include having hundreds or thousands of employees spread across multiple geographic regions; corporate silos separately administering various benefit programs such as workers compensation and group health; and multiple state and federal leave mandates like the Family and Medical Leave Act.

"It's true that most employers don't have a good handle on the actual cost of absence in the workplace, be it (under) short-term or long-term disability, workers compensation or FMLA leaves of absence," said Charles Fox, executive director for the Disability Management Employer Coalition.

"There are so many pieces of the puzzle that very few companies have a really good handle on what the actual total costs to the organization are due to absence in the workplace with all those categories of time off," Fox continued. "However, I think that intuitively they all know that it is significant, and it is a humongous number."

While employers want to know that number, there is no adequate formula for measuring productivity and presenteeism losses, said Marlene S. Dines, executive consultant for national integrated disability management at Kaiser Permanente in Oakland, California.

Other employers consider Kaiser a leader in integrated disability management practices, Dines said. Kaiser strives to track employee absences regardless of whether they are covered under a specific benefits program, and it tries to evaluate the impact of poor health on absences.

But measuring lost productivity due to absences or presenteeism remains elusive, Dines said.

"I still am looking for someone to show me how to measure lost productivity," she said. "I have not even seen that."

It's tough to gauge presenteeism and productivity losses because of the vast number of jobs performed by Kaiser's 170,000 employees, and it's impossible to measure the loss of services that occur, for example, when certain employees are absent or not functioning at their peak, Dines said.

But there are "solid" tools for measuring worker presenteeism, including one available through the Integrated Benefits Institute, said Kimberly Jinnett, research director for San Francisco-based IBI.

The tools typically rely on workers self-reporting their behaviors through surveys, Jinnett said.

"But we understand it is a struggle to figure out which tool to use, when, why and what it gets you, and how it helps your employer understand the cost to your company in terms of performance loss when it comes to illness," Jinnett said.

It was the IBI that reported last week that for the entire U.S. economy, poor worker health and its drag on productivity costs employers $576 billion annually.

Of that amount, 39 percent or $227 billion results from lost productivity tied to poor worker health that drives absences and presenteeism.

The IBI, which provides research for major U.S. employers and insurers, said it reached its estimate by drawing on 2011 U.S. Bureau of Labor Statistics wage and benefits data and its own benchmarking data from 60,000 employers.

Roberto Ceniceros writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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