The average employee is off sick for almost seven days each year – but few companies have a clear idea of how much it costs them or the best way of tackling the issue.
The average employee is off sick for almost seven days each year – but few companies have a clear idea of how much it costs them or the best way of tackling the issue.
In-depth research from Norwich Union Healthcare, published today, shows that the total cost to “UK plc” of employees’ sickness absence could reach a staggering Ł39 billion.
Yet although three quarters of companies surveyed said they had clear procedures for managing staff absence, only 25% were confident that those procedures were reliable.
And only one in 10 regularly assessed the direct cost to their organisation of sickness absence.
Where companies do provide healthcare benefits such as private medical insurance, it is often given to more senior staff – where absence levels are lowest – rather than being targeted on high risk groups of employees where it could help curb costs by getting them back to work more quickly.
The under-25s and operational/production workers have the highest absence rates, followed by women, then over-55s, then people aged 25-34.
The research is one of the most detailed studies carried out into the impact on business of sickness absence.
It focuses on the top 600 firms in the private sector, 87 of which were questioned about how they manage employee absence and what healthcare benefits they offer, rather than just looking at absence rates and costs.
Nigel Hawkins, research and development manager at Norwich Union Healthcare, said the research highlighted the need for companies to back up their absence policies and procedures with action.
“Companies do recognise that sickness absence is an important issue, but there appears to be a major gulf between intention and reality - the policies are there, but all too often they are not effectively managed or implemented,” he said.
“Sickness absence management policies need to reflect patterns of absence, but few companies are able to develop bespoke responses because they don’t have enough key information, such as is an employee off for short periods, but frequently?
“Investment in company healthcare benefits like private medical insurance can help by preventing sickness absence in the first place, or getting people back to work more quickly.
“But if those benefits are not targeted at the right groups of people that investment can be wasted.”
Other findings of the research were:
- only 10 of the companies surveyed regularly assess the direct cost of sickness absence, but the best estimate is Ł534 per employee per year – ie 3.1% of annual payroll, costing all UK companies Ł13 billion a year
- indirect costs are estimated to be twice direct costs, so the total cost of sickness absence to “UK plc” is up to Ł39billion a year
- most sickness absences are short – 54% up to two days, 28% three to five days, 19% 6+ days - but they often go unrecorded
- 95% of firms have formal written policies/strategies for absence management – but only 3.6% of them believe those policies have a major impact on absence
- there is a failure to diagnose causes of absence early so that minor problems can be prevented from escalating
- more than one in five companies had no-one with clear responsibility for absence management
- the retail, distribution and leisure sector emerged as the poorest performer on absence management
- private medical insurance is the most commonly-provided healthcare benefit - 76% of the firms surveyed provide it – but it is seen as a perk/recruitment/retention device for staff rather than a productivity/healthcare tool
Nigel Hawkins said: “With sickness absence costing firms around 9% of payroll, and healthcare where it is provided costing a further 2%, many firms are spending 11% of their payroll on sickness absence and employee healthcare.
“It is therefore surprising that few firms appear to take a ‘joined-up’ view of the problem. The sheer scale of costs to business surely demands a more integrated approach to corporate healthcare, targeting benefits to meet identified business need.
“The encouraging news is that more than half of the companies thought they would move towards an integrated approach in the next two years – they could find it will make a major difference to their bottom line.”
Media contact: Louise Zucchi, Norwich Union Press Office, 08703 666860
Notes to Editors
- The research was carried out for Norwich Union Healthcare by Robertson Cooper Ltd, who interviewed 87 major UK employers between November 2000 and January 2001.
- Norwich Union Healthcare was founded in 1990 as the healthcare arm of Norwich Union and now provides a range of income protection and private medical insurance products to to around 750,000 customers. It is one of the largest providers of income protection and private medical insurance in the UK.
- CGU and Norwich Union merged on 30 May 2000 to create CGNU plc - the UK's largest insurance group and one of the top-five life insurers in Europe with substantial positions in other markets around the world, making it the world's sixth largest insurer based on gross worldwide premiums.
- CGNU's principal business activities are long-term savings, fund management and general insurance, with worldwide premium income and retail investment sales from ongoing business of over Ł27 billion and assets under management of more than Ł200 billion.
- From October 2000, the combined life and pensions, general insurance and retail fund management businesses in the UK operate under the Norwich Union brand, while the institutional investment business operates under the Morley Fund Management brand.
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