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Retooling Absentee Programs Bolsters Profits

HR can reduce the costly effects of absenteeism by switching to combined paid-time-off plans. See how several companies creatively revamped their programs.

August 29, 2002
Related Topics: Attendance, Scheduling, HR & Business Administration
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When it comes to your company’s sick leave policy, keeping people honestcan tax even the most experienced HR professional. Like it or not, mostemployees—even loyal veterans—consider sick leave theirs to take, no matterthe condition of their health.

Unlike vacation and other scheduled time off, sick leave is among the hardestworker benefit to manage because it is, by definition, unanticipated. When aworker calls in sick right before a shift, his absence has a domino effect oneveryone else’s workload. Providing inducements that discourage employees fromdrawing on their accrued sick days at the first sneeze, and even making perfectattendance into a game, can help dramatically reduce all the hidden costsassociated with your company’s sick leave liability.

Consider these examples. The Lahey Clinic, a major health care center andteaching hospital in Burlington, Massachusetts, recently switched from atraditionally defined benefits system that considered sick time and vacation andholidays separate days off, to an “earned time” program. At the Clean AirAgency, a state-funded, quasi-public environmental program in Seattle,professional staff members can take longer vacations by using their sick timeconservatively.

And at Electric Boat, a major old economy defense contractor in Groton,Connecticut, a sick time lottery contest was introduced in 1994. Since itsdebut, the average number of sick days among salaried employees has dropped from7.2 per year to 4.3, a 38 percent decrease.

Statistically, time away from work due to short-term illnesses takes a majortoll on the nation’s economy. In 1996, the latest year federal statistics areavailable, the country lost 3.6 million work days due to acuteillness-everything from headaches and toothaches to pneumonia and the flu, theNational Center for Health Statistics reports.

Cynthia Keaveney, a senior vice president and national practice leader withAon Consulting in Ann Arbor, Michigan, says organizations of all sizes “oftendon’t know what absenteeism is costing them. And if they do recognize theyhave a problem, they have a hard time computing the cost.” Frequently thislack of accountability is because different departments are responsible forkeeping track of the different types of time away from work, she says.

“Typically long- and short-term disability is handled by HR but worker’scomp and return-to-work is in the realm of risk management,” she adds. “Familymedical leave, which is a growing concern for many organizations, is typicallyhandled by the legal department.”


As companies throughout the country struggle to maintain productivity in aslow economy, leave time programs that help control unplanned events likesickness, as well as planned absences such as vacation and holidays, arereceiving renewed attention.

As companies throughout the country struggle to maintain productivity in aslow economy, leave time programs that help control unplanned events likesickness, as well as planned absences such as vacation and holidays, arereceiving renewed attention. At the same time, the demand from employees formore flexible leave time programs is growing dramatically.

Instead of traditional “designated benefits” programs which define sicktime, holidays, and vacation time as separate times away from work, employersand their employees are favoring “paid time-off plans,” or PTOs, systemswhich combine all time off into a pool employees can use as they wish.

The 2001 Survey of Employee Benefits, conducted by the Society for HumanResource Management, reports that 62 percent of the employers questioned nowoffer some form of PTOs. That’s almost twice as many as in 1997.


"...a traditional program really encourages employees toabuse the system, to take sick time when they aren’t really sick"

Rolling sick time into “earned time” off
At the Lahey Clinic, Joan Robbio, the director of human resources, says theorganization “found that a traditional program really encourages employees toabuse the system, to take sick time when they aren’t really sick.” Earnedtime includes fixed calendar holidays like Thanksgiving and the Fourth of Julyas well as paid vacations and unscheduled events like illness. “We want totreat our employees like the adults they are,” she says. “Earned time istheirs to manage as they see fit.”

The Lahey program is open to all full time employees and those part timeworkers on the schedule for at least 20 hours a week. It has been designed inexacting detail because it must work across a multi-skilled workforce in abusiness that operates all day, every day. Eligible employees earn a specificnumber of earned time days per year depending on their scheduled hours of work,years of service, and position grade level. There are two types of absences forwhich an employee can draw from their earned time bank: scheduled andunscheduled time away from work. Absences due to military service, jury duty, ora death in the family are handled on a department-to-department basis, Robbiosays.

Unscheduled use of earned time includes illnesses of less than fiveconsecutive days or unanticipated emergencies. Scheduled earned time off likevacations must be approved by the employee’s supervisor, Robbio continues.Workers are expected to use at least 20 days per calendar year for illness,holidays, or vacations but they can bank up to 1.5 times their annual calendaryear accrual to a maximum of 520 hours.

In certain circumstances, earned time can even be sold back to the LaheyClinic for cash.” This is a real benefit for people where money is moreimportant than the time off,” Robbio says. From the institution’sperspective, the key to a successful earned time program is the educationalcomponent. “We stress that managers have a responsibility to make sureeveryone on their staff understands the program and that the time-off isproperly accounted for. We stress that staff members have the responsibility tomanage their earned time prudently and give their managers as much advancenotice as possible so that the department can continue functioning efficiently.”

That means that if a worker is out every Monday, he or she will face somequestions from the boss, Robbio says.

Generally speaking, the system is so popular that staff members are carefulnot to ask more of managers than is reasonable because they don’t want to losethe benefit, she adds. “We know it’s working because we have fewer peoplecalling in sick at the last minute. Beyond the benefit to the worker incontrolling their work lives a little more, it represents a major cost savingsto the institution because replacement workers are so expensive in the healthcare environment. We’re also avoiding the morale problems that were createdwhen managers were forced to ask their employees to work overtime at the lastminute. As far as we are concerned, the traditional sick time system was alose-lose proposition for everyone.”

Using sick time as morale builder
For many companies, the desire to allow workers to gain some control overtheir work-life by using sick time as a fringe benefit is an obvious plus. “Wefelt we wanted to reward workers who make an effort to get their jobs done dayin and day out no matter what is happening in their private lives,” says MaryAnne Erickson, director of human resources at the Clean Air Agency. “Professionalstaffers can take longer vacations by using their sick time conservatively.

“We never believed this program would actually reduce the amount of timepeople took off. We saw it mostly as a worker benefit.” Instead of 10 days ofsick time and 10 days of vacation, the eligible managers in her agency nowreceive 18 “time off benefit” days to be used at their own discretion.

To come up with a fair number of base days for its consolidated time-offplan, Erickson says her agency looked at the average use of sick and vacationtime for her industry. The benefit days accrue at the rate of one and a halfdays per month of employment, she says. The agency benefits most at the time ofscheduling. Employees are asked to plan all their time-off days well in advance,except in the case of acute illness.

Erickson says she’s not yet sure about the program’s popularity. “It’sgreat for people who never took much sick time because they can now put thattime towards a longer vacation,” she says. “It’s a reward. It feels likethey are getting extra vacation.” The problem is for those who have reliedheavily on sick time in the past. The new consolidated system means employeescan potentially lose a portion of vacation time because of illness, she notes.

Making good attendance into a game 
When Greg Angelini’s kids take out the controllers for their prized videogame unit, they have their father and his perfect attendance at work to thank.Angelini, a software engineering manager at Electric Boat Company, won $1,000 inhis company’s sick time lottery just in time for Christmas in 2001. With thatunexpected bonus he was able to pay top price for the hottest toy of the year.

“I’m not a gambler but it sure was nice to get that check right beforeChristmas,” says Angelini, who has worked for the defense contractor for 17years. “And it was just as nice that the powers that be noticed that I’vehad perfect attendance, the fourth year in a row.”

Electric Boat’s sick time lottery is as remarkable for its simplicity tomanage as for its popularity among employees, company officials say. Theworkforce incentive contest rewards workers who use less than average amounts oftheir sick time. But instead of handing out modest bonuses to every eligibleemployee, the company holds a bonus check lottery game with the lucky winnerswalking away with $500 to $2,500 each.

“We were aware of many companies which pay out cash to reward workers forholding their sick leave down,” says Dan Clancy, the human resources managercredited with coming up with the contest idea. “I hit on the lottery becausewe wanted the awards to be substantial enough to hold people’s interest. Agame seems to make it all the more fun.”

Robert Nardone, vice president for human resources, says that last year afull 1,400 workers out of an eligible pool of just over 3,900 used no sick time.In the 2001 lottery held last December, Electric Boat, which employs 9,850unionized and salaried workers, awarded $150,000 to 195 people on itsprofessional staff, in four separate bonus check raffles. Salaried workersbecome eligible for the lottery program if they use one percent or less of theiraccrued sick time, Nardone says.

Out of a pool of nearly 933 eligible workers, or 25 percent of those eligiblewho used no sick time in the past two years, 20 $2,500 prizes were awardedthrough the lottery. Those who had used no sick time in the last year competedfor 75 $1,000 prizes and 50 $500 prizes. Prime parking spaces were handed out toanother 25 and everyone eligible for the lottery received a $25 gift certificateto the company store.

Executives at Electric Boat turned to the human resources department for helpin controlling the cost of sick time eight years ago when the company was facinga major restructuring.

Electric Boat, a division of the General Dynamics Corp., buildsnuclear-powered submarines primarily for the U. S. Navy. The company engineeredthe first practical, underwater naval warship and since the early 1900’s hasdominated the international submarine market.

As a profitable and stable defense contractor, Electric Boat has always beena desirable place to work, Nardone says. But with the end of the Cold War in theearly 1990s and a presidential administration focusing its attention on arocket-based defense system, the company was forced to tighten its belt. Thetask of downsizing its workforce and decreasing its payroll was made moredifficult because the average age of its workers was well over 40, Nardone says.“People land a job at Electric Boat and expect to stay for their entirecareers. Workers who have been here 10, 15, and 20 years had a substantialamount of sick time coming to them, up to 130 days in some cases.”

Where the front office saw a huge liability in the amount of sick time itmight have to cover, the human resources department recognized an opportunity.“Even as we were downsizing we were still in a hiring mode for specializedworkers and we knew we had to shed a traditional benefits program and move to amore flexible system, particularly if we wanted to continue to attract youngerengineers,” Nardone says. “They look for companies that allow them to manage their work time.”

Nardone says the sick time lottery is matched with a liberal flex-time systemthat allows workers to make up loss work time whatever the reason. If Angelinineeds to go to the doctor or leave work early to attend a child’s sportsevent, he adjusts his working day to come in a few hours early or leave a fewhours late, depending on the needs of his work group.

“Or say I was sick on Monday, I can make the time up later in the week,”Angelini says. The group of 55 workers Angelini manages reduced its use of sicktime by 37.6 percent since 1997 by allowing workers to make up unplanned timeaway from work.” Although we are proud that 41 percent of our people haveperfect attendance (now), we make it clear we don’t want people coming to worksick.” Nardone adds. “Together the sick time lottery and flex-time systemhelp the employee take responsibility for getting their work done.”


Tips on LoweringAbsenteeism, Increasing Productivity

Employee absenteeism is a persistentand profit-draining issue. Findings in a recent Productive Workforce surveyindicate that the annual cost of absenteeism to employers in the United Statesis from $30 to $50 billion. Survey participants reported that the top threecauses of absenteeism were personal responsibilities, health problems, andinappropriate use of personal leave.

ProductiveWorkforce lists the following best practices for addressing absenteeism:

  • Work to get employee and employer buy-in.
  • Design flexible work arrangements and/or arrangements for telecommuting.
  • Implement improved technology systems so appropriate data can be captured.
  • Create programs enabling employees to manage their health and the health of their dependents.
  • Administer ergonomic and/or safety programs.
  • Promote awareness about importance of absenteeism programs.
  • Work with unions to develop mutually beneficial policies and programs.
  • Provide adequate, timely data, and effective reporting.
  • Publish consistent policies.
  • Increase supervisor involvement in return-to-work issues.

Workforce, September 2002, pp. 56-62 -- Subscribe Now!

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