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Articles from The Business Forum Journal
OPTIMIZING PRODUCTIVITY BY ABSENCE MANAGEMENT
By Bob Trotta
Where are your employees today?
Do you know how many are not at work? Most employers are facing an increasingly competitive landscape for finding and keeping human capital, but relatively few know how many employees are actually at work on any given day. Small employers feel this pain more directly, and may know who is out, but not how to address the problem. The larger employers know it is a problem, but lose sight of that direct impact to their bottom line.
Test out the conventional wisdom on your own company: - Published estimates
List % of your employees out on vacation today - (1-2%)
List % of employees out on an unscheduled absence - (1-2%)(1)
List % of employees out on disability or workers’ comp - (4-10%)(2)
Total % of employees out today (6-14%)
Please note - these estimates will vary depending on industry, number of employees, average salary, and employee type.
Benefits planning and management are key components of success. Productivity goals are Board-level discussions as corporations grapple with new technology, global competition, and a shortage of human capital. The Human Resources professional has become the central figure in developing creative benefit plans, perks, recruitment strategies, and morale building exercises. But there is evidence that the greatest gains in productivity can be had by lowering the number of employees being paid not to work.
Watson Wyatt Worldwide and the Washington Business Group on Health recently released the results of their fifth Staying@Work survey of large employers(3). According to their survey, organizations that simultaneously implement disability case management, involve line supervisors in absence management and designate an internal absence manager have an average absence rate of 1.4 percent, compared with 5.3 percent of those doing none of these activities.
In their study, this computed to a per employee savings over $3,600 per employee per year. This figure included both the wage replacement costs and the revenue capacity associated with the employee’s individual contribution to revenue. The actual impact will vary widely depending on the industry and company policy, but clearly there are significant dollars at stake, and realizing a true savings has more to do with the lack of data available to measure it than the nonexistence of the cost.
Also, in the study, increasing productivity was cited as the number one goal of the companies absence management programs, yet two-thirds did not know what their absence rate is or how their experience compares with their own industry.
What is Absence Management?
Absence management means tracking and managing all lost work time. The outgrowth of absence management as a concept stems from the disability insurance industry. The lost work time view has been steadily moving back towards the first day or even minute recorded as lost time. For many years, the common theory was to manage long-term disability dollars since incidence was low but claim costs could be extremely high. Soon insurers and administrators saw the value in early intervention. Disability was really the result of a serious medical condition that needed to be addressed early if there would be any opportunity for savings. Since the vast majority of short-term disability policies have a one-week waiting period, many employers have settled for disability data only. As human resource information systems (HRIS) and payroll systems have improved, the notion of managing lost work time from the onset has been adopted as absence management.
This view was accelerated in 1993 with the passing of the federal Family and Medical Leave Act (FMLA). The FMLA requires covered employers to provide up to 12 weeks of unpaid family and medical leave to eligible employees. According to the federal FMLA, state laws providing greater benefits or lesser restrictions should be applied to the benefit of the employee. This can make the interpretation of which law applies and whether the leaves are concurrent or consecutive extremely tricky. Employers must ensure that their employees receive all of the benefits allowed by both the federal and state leave laws.
Leave of absence policies are designed to allow employees extended periods of time when they encounter unusual or unavoidable circumstances. Leaves can cover a wide range of reasons from an employee’s own serious illness to military service to bone marrow donation to civil air patrol service. Numerous federal and state laws must be considered when designing or implementing leave of absence policies.
The Americans with Disabilities Act may also apply and could include additional leave time as a reasonable accommodation for an employee with a disability. In its Appendix to the Title I regulations, the Equal Employment Opportunity Commission states that “other accommodations could include permitting the use of accrued paid leave or providing additional unpaid leave for necessary treatment, …”. State workers’ compensation laws and the Fair Labor Standards Act (FLSA) can also have a profound impact on the terms of a leave
Where to start?
Absence management requires a well thought out plan for implementation and a willingness to change. Absence is a broad issue spanning multiple departments (with line responsibility, i.e., benefits for disability, vacation, sick leave; and risk management for workers’ compensation) and effecting every supervisor and manager. To effect change, you will need a central repository of data on all absences from “leaving work early” to attend a child’s school function to long-term disability. This will require accumulating data from the various sources - disability benefits, payroll and timekeeping systems, workers’ compensation and/or HRIS. The integration of this data with health information has spawned a new emphasis on data warehousing for health and productivity data, and the accompanying analysis and benchmarking to assess the available opportunities for improvement.
Training and Education
Supervisors and managers have a critical role in the absence process. They are most likely the first ones to know when an employee will be absent. Recognizing the need when it is not obvious and asking sufficient questions to determine what policy governs, or if FML laws apply, yet not asking about the nature or extent of the condition require sufficient training and education. When employees ask for time off, but do not expressly mention FMLA, supervisors need to ask employees sufficient questions to determine if the FMLA applies. In fact, the employee need not specifically request FMLA leave time for the FMLA to apply. According to the Commission on Leave’s Report to Congress, 67.5% of employees learned about the FMLA from the media(4). Thirty seconds on the nightly news is not the ideal way for your employees to learn about their benefits, or for your supervisors to figure out how to deal appropriately with these issues.
The application of your absence policy can also have a profound impact on employee morale. Employees are people who understand the fairness doctrine, and it is critically important to all employers that their employees can rely on fair and equitable treatment when they are out on leave. Particularly when your culture supports teaming and encourages high performance teams, each member is aware of the productivity of their team members. Any deviations in treatment will circulate through the work area faster than the latest gossip column.
The Bottom Line
Absence management is crucial to productivity and bottom line results. Initiating the support and resources necessary within your company to design and implement a plan to coalesce the data, study it, and take action can have positive impact on both your costs and your morale.
(1) BNA’s Job Absence and Turnover Report, Fourth Quarter 1999
(2) VPA’s database of over 350 employer plans and 800,000 covered employees.
(3) “Improving Workforce Productivity through Integrated Disability Management”, Fifth Annual Survey Report, 2000/2001 - Watson Wyatt Worldwide and Washington Business Group on Health.
(4) “A Workable Balance: Report to Congress on Family and Medical Leave Policies”, Commission on Leave, 1997
About the Author:
Bob Trotta is a Fellow of The Business Forum. He is currently the Vice President, New Business Development for VPA, Inc. VPA is the largest self-insured disability benefits administrator in the US with headquarters located in Calabasas, California. Bob leads VPA's Marketing, Strategic Planning, and Service Development efforts.
Bob's career includes executive positions in sales/marketing and finance/administration in both service and manufacturing companies. His varied experiences include strategic partnering, organizational development, e-commerce, change management, account management, mergers and acquisitions, project management, application development, and human resource administration. Bob’s expertise was the driving force in the development of several new services, including LTRS - providing leave tracking and administration of Federal and state family and medical leaves, Ultimate24 - an integrated disability management program, and VPA’s integrated health and disability program.
Bob is a frequent speaker and writer on absence management and disability benefit topics. Bob received his BS, Accounting, from the University of Rhode Island, 1980.
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