Workforce.com

Tallying the True Cost of Absenteeism

April 19, 2006
Companies can draw on new empirical data to underscore the importance of designing health benefit programs that combat absenteeism. The study, "How to Present the Business Case for Healthcare Quality to Employers," finds that the actual cost of health-related absenteeism could be as much as 35 percent higher than conventional estimates.

In fact, expenses associated with absenteeism can run upward of $74 billion annually for U.S. companies, says Mark Pauly, co-author of the study and professor of health care systems at the University of Pennsylvania’s Wharton School.

Researchers derived this figure by taking into account spillover expenses, such as overtime and overstaffing, that companies incur to compensate for the absence of a worker.

What’s more, the study finds that absenteeism takes a heftier toll on knowledge-based industries. Positions where absenteeism is most costly include mechanical engineers, paralegals and motor vehicle salespersons. Knowledge-based positions require more teamwork and foster interdependence, which explains why the absence of a colleague would have a more severe ripple effect, he explains.

Besides shedding light on the indirect costs associated with absenteeism, the study helps companies to gain a clearer understanding of the return on investment that their health benefits programs render.

Companies that do not apply spillover expenses when estimating the financial impact of absenteeism are most likely underestimating the value and merit of health care programs that reduce absences.

The study’s primary call to action is for companies to create health benefit programs that more aggressively tackle absenteeism. The problem is more detrimental than they might think, Pauly says.

Gina Ruiz