Absence Management

Time is Money: How Organizations Can Effectively Monitor and Manage Absences to Improve Productivity and Mitigate Risk

Employee absence is a significant cost for businesses. Absence management has gained C-level visibility as more organizations seek to understand and reduce the direct and indirect costs associated with employee absences while increasing the productivity of their workforces. An automated workforce management solution with time and attendance, self service and scheduling optimization functionality can empower organizations to appropriately plan for scheduled absences according to policies as well as monitor patterns of unscheduled absences to understand the underlying causes.

Time is Money: How Organizations Can Effectively Monitor and Manage Absences to Improve Productivity and Mitigate Risk

Employee absence is a significant cost for businesses. Absence management has gained C-level visibility as more organizations seek to understand and reduce the direct and indirect costs associated with employee absences while increasing the productivity of their workforces. An automated workforce management solution with time and attendance, self service and scheduling optimization functionality can empower organizations to appropriately plan for scheduled absences according to policies as well as monitor patterns of unscheduled absences to understand the underlying causes. Acting on this analysis fortifies the business, ensuring the right skill sets are available at the right time (and at the right cost) to keep the business moving forward. As a result, by making more informed decisions, organizations improve how they schedule their workforces, facilitate compliance with pay, work and union rules as well as government regulations and internal policies – all while controlling the costs associated with employees being absent from work.

Executive Summary

Whether planned or unplanned, workers are going to be absent. People may need time off for illness, for vacation, to care for a family member or perhaps for an extended leave to pursue studies. In the past, organizations with a high population of shift workers may have felt the impact of absences sooner and more directly than organizations with salaried workers, but in today’s environment with fewer resources available to do the work of many, and worker productivity tied to business objectives, that playing field has become somewhat more level. When employees are out of work, it increases organizational risks related to regulatory compliance (such as the Family Medical Leave Act or FMLA), workplace safety staffing guidelines and business performance objectives as well as potentially diminish margins when overtime is involved or temporary workers have to be hired to produce the work.

Yet, according to a study from industry analysts at Stamford, Conn.-based Gartner Research, less than half of organizations measure or manage employee absences effectively. The same study notes that employee absences can account for more than three percent of direct payroll costs. However, employee absences cost more than just money; employees that are absent impact customer satisfaction, sales, production, employee morale, safety and compliance, among other things. The most recent CCH Unscheduled Absence Survey notes that the nation’s largest employers estimate that unscheduled absenteeism costs their businesses more than $760,000 per year in direct payroll costs, and even more when lower productivity, lost revenue and the effects of poor morale are considered.

Along with being able to prepare for the unexpected, companies also need to account for short- and long-term scheduled absences such as vacation time, jury duty, military leave and pre-scheduled medical and professional appointments to ensure the necessary talent is available when needed to minimize the disruption caused by absence and to maintain the level and quality of service for optimal business performance. By relying on manual processes to track absences, organizations are missing the opportunity to proactively identify, manage and minimize the impact of employee absences, validate and monitor policies and uncover trends and areas of workforce improvement.

Employers would benefit from collecting absence data, analyzing the information to identify the frequencies and patterns of absences and to understand and remedy the underlying causes. For example, the management style of a particular manager or an increase in workloads may be the cause for increased absences. Absences impact the bottom line due to direct costs and loss in productivity. An automated workforce management solution with absence management capabilities is an essential tool to help organizations improve staff deployment and productivity, increase decision-making accuracy, and ensure precision in payroll processing (while reducing the need for costly manual checks to reconcile errors and overruns). It also ensures adherence to complex and diverse pay, work, and union rules and policies, and promotes compliance.

Similar to payroll administration, the administration of employee absences is multifaceted regardless of the size of the organization. In the U.S., state and federal regulations exist to guide the differing types of employee leave. Union contracts and other labor agreements establish guidelines. Furthermore, there is the need to answer the questions underlying the absences. Are there patterns of behavior such as Monday/Friday absences? Are there environmental causes? Is stress brought on by economic pressures, increasing workloads or specific managers causing an increase in absences? Are policies and thresholds too strict or too weak? Are they enforced by managers? Are disciplinary actions managed properly and are they appropriate? Can employees trade vacation time for pay? What is the carry-over policy for unused sick and/or vacation time? The essential first step in managing absences is to have clear absence policies defined, applied consistently and enforced by management.

By adopting a Web-based automated workforce management system, organizations gain greater visibility into these issues. They can take actionable measures to ensure that time and attendance business rules are aligned with regulations and policies to eliminate human errors and protect the business from potential leave-related lawsuits. The more sophisticated workforce management solutions can also help management determine the daily, weekly, monthly and yearly financial impacts of employee absences, providing the decision-support to take the steps necessary to proactively address them.

This paper explores the advantages of a workforce management solution with absence management capabilities to minimize the impact of employee absences and ensure organizations are able to effectively match labor supply with business demand.

When considering an automated workforce management solution, make sure it covers the following capabilities:

*Deliver business intelligence that empowers organizations to more effectively plan for employee absence. Through an automated solution companies can leverage data to identify absence trends and patterns (and respond proactively), gain insight into what employee absences are really costing the business, and have the necessary visibility to improve workforce deployment.

*Optimize schedules and ensure employees with the right skills are available at the right time and at the right cost. An automated workforce management solution with optimized scheduling and absence management capabilities helps organizations accurately forecast and schedule shift workers and salaried professionals alike to meet both customer service and cost objectives.

*Facilitate compliance with regulations such as FMLA and ADA (Americans with Disabilities Act). A workforce management solution automates administration and tracking of employee leave to ensure compliance while making sure requests are valid thereby reducing exposure to non-compliance violations.

*Ensure adherence to policies, procedures and work and union rules, and automate disciplinary actions. The system should be able to track deviations from planned attendance, including such activities as late arrivals, early departures or not working on a scheduled day. Actions such as verbal and written warnings, last chance agreements and suspensions or terminations are automated through the system.

*Provide employees with self-service options to monitor vacation and sick balances. When employees are empowered to manage their own schedules, morale improves. Through the system, employees can request time off, trade shifts and schedules, view balances and monitor and manage leaves more efficiently. Managers can also respond electronically and ensure fairness by making equitable staffing decisions.

Ease Absence Administration

According to Gartner Research, disciplined absence management has a direct cost savings benefit, with best-in-class organizations incurring one-quarter of the costs of their less disciplined peers. Without a firm understanding of the myriad of leave types and government regulations, coupled with a consistent, comprehensive absence policy and tracking procedure, uncovering as well as controlling the direct and indirect costs of employee absence can be almost impossible.

While there are four different types of absenteeism, the possible combinations of these absence types are diverse:

• Scheduled/authorized
• Unscheduled/unauthorized
• Short-term
• Long-term

For example, a scheduled absence might be paid or unpaid time off, such as vacation time, a sabbatical or educational leave of absence, or maternity or other medical leave. To further complicate the picture, there are unanticipated but scheduled leaves such as military leave or time off related to a worker’s compensation injury. These types of absences are granted when the appropriate persons are notified in advance and the absence is in accordance with workplace policies. Authorized absences may include all the above as well as instances such as time off to vote or emergency situations that are beyond the employee’s control such as a fire, flood or natural disaster.

Unscheduled absences occur when an employee is not present at work during a normally scheduled work period and can include illness, a death in the family, short- and long-term disability, family care or personal issues. Unauthorized absences represent time taken without a manager’s permission, time taken outside of corporate guidelines, and tardiness or early departures – all of which create challenges for the business as well as other employees, negatively impacting morale and productivity.

Whether planned or unplanned, any type of employee absence presents its problems. When employees give advance notice that they’ll be using vacation time or personal days, managers have time to prepare but still need visibility into resource skill sets and corresponding availability in order to plan accordingly. When the unexpected happens, that visibility becomes even more crucial as they need to appropriately staff and maintain performance levels. With an automated workforce management solution in place businesses understand absence occurrences, their impact to the business and plan more effectively when people take time off.

In addition to types of absences and the differing ways leave can occur, there are also regulations related to leaves of absence such as FMLA, and organizations are not only at risk for failure to comply, but for granting a leave that isn’t valid. For example, FMLA leave can be granted to an employee needing to provide medical care to a spouse, but not to a life partner. If an employee approaches their manager with a request for time off to care for an ailing partner they are not married to – regardless of their living situation or length of commitment – that manager could leave the organization liable for a compliance violation should they grant a leave under FMLA. The cost in time and money associated with administering FMLA and leave of absence requests is burdensome to many organizations. Many organizations simply don’t have the staff or the expertise in house to manage the processes - so much so, that it is one of the prime candidates for outsourcing.

From a payroll perspective, there are costs associated with employee absence. For example, there may be time entry adjustments that need to be made when an employee takes time off. Studies show that such errors predominantly favor the employee through overpayments. This can result in benefit calculation errors as some benefits programs are based on the number of hours worked as opposed to time taken for sick time. For example, if an employee is out on a paid or unpaid leave of absence, they may not continue to accrue sick pay or vacation time until they are actively back at work. There also may be different rates of pay based upon specific jobs people perform and whether they are using sick time or vacation time.

Along with increased accuracy from electronic data entry, an automated workforce management solution ensures time and attendance entries are correct and enforces adherence to business rules. It also facilitates compliance with government regulations, as well as with internal policies and union requirements.

Since these business rules drive accruals, paid time off, time accrued towards participation in retirement programs and leave management, having them properly tracked and validated can result in greater accuracy of benefits accruals and lower payroll costs. For example, direct benefit and direct contribution benefit plans are calculated on formulas based on time worked, in addition to other factors. Employees may no longer be eligible for contributions to their retirement plan should they take a leave of absence or they may not meet the minimum numbers of years of service due to excessive absences. By tracking incidences through the system, payroll can reduce discrepancies in sick leave balances and forward accurate calculations of retirement benefits to plan administrators.

Other hidden costs of absences may include the need to hire temporary workers to meet production deadlines or the use of overtime to keep the business moving forward. In addition, there are indirect costs such as lost sales, poor customer service, missed deliveries, higher benefit costs and increased turnover that result from employee absences. Not only is absence a significant payroll cost, but excessive absences may indicate deeper workforce-related issues such as poor management, increased worker fatigue due to excessive overtime, substance abuse or lack of accountability.

To address the problem of absenteeism and its resulting impact on the organization, employers need to gain better insight into the issues that lead to employee absence, understand the direct and indirect costs of absenteeism, and use technology to put processes in place that enable them to reduce those costs while motivating a more productive workforce.

A workforce management system with absence management capabilities gives organizations the tools they need to manage and control absences in accordance with corporate policies, pay, work and union rules, and to automate disciplinary actions. It empowers organizations to optimize scheduling and effectively plan for the unexpected and provides employees with a self-service solution to monitor vacation and sick balances.

Effective Absence Management

Effective absence management begins with the collection of time and attendance data whether capturing all time data or exception time only (e.g. sick and vacation.). Through an automated solution, employers can get to the root cause of absenteeism, accurately track time and attendance and optimize the productivity of their workforce.

The ability to track, manage and analyze absenteeism according to organizational policies is a key benefit of a workforce management solution. Manual methods of tracking employee time are time consuming and compromise accuracy and fairness in scheduling replacements. By automating the tracking of absence occurrences, companies can identify where and when absences take place.

Absences can be managed through time clocks, telephones and through technologies such as Web-based portals, kiosks and BlackBerry® smartphone and other mobile and remote worker devices. This results in more accurate time keeping and provides managers with meaningful information for workforce planning.

Calculating accruals and allowing employees to view balances improves accuracy of information, employee morale and effectiveness of policy enforcement. Managers gain visibility into balances to prepare staffing plans for regular and peak scheduling times.

Having comprehensive, up-to-date analysis of absence data can also reveal trends and patterns. Organizations might discover certain days of the week and times of the year where levels of employee absence are elevated. For instance, analytics may reveal that a large portion of the workforce is calling out on days that directly precede a holiday. This type of information enables companies to develop a policy that sets expectations, and/or provide an additional employee “perk” that improves morale as well as deliver more predictability and optimization of the workforce.

Uncovering these trends might also reveal workload imbalances that contribute to excessive turnover or increased absenteeism. For example, changes in the pattern of demand may require additional overtime in some environments, contributing to serious fatigue problems. Industrial surveys reveal that absenteeism rates are nearly double in facilities with severe fatigue problems, as compared to facilities where fatigue is not a problem. Depending on the industry, this impact could be significant. By having insight into schedules and absences patterns businesses can take a proactive approach and fatigue management to scheduling to minimize absenteeism and meet business goals.

Tracking occurrences (such as how many times an employee forgets their badge) and incidents (such as multiple unauthorized absences) gives managers the ability to issue appropriate warnings and to take the appropriate actions whether establishing a plan to resolve the issues or follow through on suspensions or terminations.

Automated solutions also help automate policies and the workflow of the approvals. The system will track deviations from planned attendance, including such activities as late arrivals, early departures or not working on a scheduled day. A formal communication plan or employee handbook that outlines policies is essential. An automated solution ensures employees adhere to policies and through self-service functionality managers can easily approve or decline requests. The system can then manage such actions as verbal and written warnings, last chance agreements and suspensions or terminations.

Understanding absence occurrences enables businesses to optimize schedules and ensure the right people with the right skills are in the right place at the right time. Once an organization has visibility into their workforce movement and metrics, they can rapidly identify and work to resolve issues such as increased absenteeism or turnover. Increased visibility into worker availability and skill sets enables organizations to plan proactively. It also promotes a greater sense of fairness. For example, through the system, managers can make sure the same employee isn’t scheduled to work holidays or given preferential hours. It can also make sure the necessary skill sets and right certifications are available without compromising business goals.

Ensuring compliance with government and safety regulations, union rules and corporate policies is also facilitated through an automated system. A workforce management system tracks multiple types of leave and reduces the risk of non-compliance with regulations such as FMLA. It centralizes absence-related data and facilitates the ability to manage policies and effectively comply with laws and regulations.

It also helps enforce organizational and union rules. For example, in some industries vacation policies require employees to take their vacation days consecutively as a means of effective financial control. It also means someone needs to take over the employee’s duties during that time. An automated system facilitates compliance and provides the insight needed to effectively adjust workforce planning.

Better data promotes better decisions and more engaged employees. Timely attendance at work is crucial to making the business run smoothly. A workforce management solution with scheduling optimization and absence management capabilities can reduce and better distribute labor costs, boost sales and increase productivity by ensuring the right staff with the right skills is available at the right cost.

Beyond time and attendance tracking, the system becomes a “smart tool” that enables businesses to improve operational efficiency and productivity and leverage workforce performance to impact business performance.

Scheduling solutions can empower employees to control their own schedule and take into account their choices while adhering to specific guidelines. There’s a personal element to absence management and an automated solution gives employees control over their schedule and the ability to effectively plan time off while providing managers with the oversight to maintain business performance.

Reduce operational costs and foster a more productive work environment. A workforce management system which includes time and attendance, scheduling optimization and absence management capabilities enables organizations to more efficiently align their workforce with business demands to increase sales and meet customer satisfaction objectives. Since human capital typically represents between 35 to 70 percent of organizational costs how workers are deployed and how their time is managed directly affects an organization’s ability to achieve goals and maximize profits.

Better Process, More Informed Decisions, Better Results
Automating absence management enables companies to go beyond tracking time and attendance to make more informed decisions, improve how they schedule resources and deploy their workforces, facilitate compliance with union and government regulations, ensure adherence to internal policies and improve customer service. By taking a proactive approach to absence management organizations can control costs associated with employees being away from work, and ensure employees get the time off they’ve earned while keeping the business running effectively and efficiently.

1) Gartner Research, “Managing Employee Absence: Absence Makes the Heart Grow Fonder, and Time is Money,” February 2009

2) 2007 CCH Unscheduled Absence Survey

3) Gartner Research, “Managing Employee Absence: Absence Makes the Heart Grow Fonder, and Time is Money,” February 2009

4) Aguirre A, Moore-Ede A. Shiftwork Practices 2007. Circadian Technologies, Stoneham. 2008

5) “Human Capital-The Elusive Asset,” Society for Human Resource Management, 2003