Let´s put this into perspective. Time-off is a necessary benefit provided by companies to employees. The two most common types of time off are sick leave and vacation. If an employer did not offer vacation or sick leave, they would accelerate health problems thereby lowering productivity and morale. Despite the pressure for perfect attendance to improve customer service and efficiency, employees need equitable vacation/sick leave programs for security and overall high performance. However, most organizations suffer from time-off abuse, which translates into significant lost revenue. Like many other heads of companies, Paul Diaper, CEO of Obus PLC, recognizes the issue. "Companies struggle to accurately plan, manage and report employee absenteeism and vacation. Companies need a system that facilitates the ability to take care of this whole process with ease and generates substantial cost savings".
The average, fully loaded, annual salary across the US for a white collar professional is $49,818. With 241 working days in the year, the average employee costs a company $206 a day. A company with 1,000 employees, missing on average only 2 days per employee annually, will annually lose over $400,000. This is real money that has to be paid out on termination or when an employee leaves.
According to CCH Incorporated, a company that produces electronic and print products for the tax, legal, securities, insurance, human resources, health care, and small business markets, unscheduled absenteeism can cost up to an average of $602 per employee, per year. This cost does not include indirect costs such as overtime pay for other employees, hiring temporary staff, missed deadlines, lost sales, sinking morale and lower productivity. Indirect costs can add up to 25 percent of the direct costs, according to Employee Benefit News (December 1999) and HR News (November 1999).
In a survey of eleven U.S.-based telecommunications organizations, 72 cents of every dollar of costs related to employee absence stems from lost productivity, rather than hard costs, such as health care and disability benefits (Business Insurance, July 2000). Also, according to the Chartered Institute of Personnel and Development (CIPD) in the UK, recent figures show that absence costs jumped by nine per cent over the year, with Mercer HR claiming the cost to industry to be as much as £34 billion. (These figures just apply to the UK).
Most HR professionals do not need to see these figures to understand that there is a problem. Intuitively, everyone understands that this is an issue. The real question is, what can be done about it?
Many companies employ a "use it or lose it policy" and believe that this insulates them from liability. While it is true that they do not continue to carry the liability on their balance sheet, unless they have a good system of capturing time-off, employees can use that time-off twice. This increases their vacation allowance, essentially resulting in the same problem. "Companies are in need of a process that is capable of accurately and effectively capturing employee time off. This is a process that has always been an issue. However, if captured accurately, companies could potentially save hundreds of thousands of dollars." (John Hodgson -Senior Vice President of Tele Pacific Communication).
Vic Daley, Vice President of HR- Amerus, sees even beyond the great amount of money lost. "While the dollars potentially lost are certainly a real concern, I have a more cogent issue with the loss in productivity. Finding a solution that confronts both these issues and promotes good employee morale is a real win- win situation."
The crux of the issue is that the time-off process has to be initiated and confirmed by the employee. Many employees employ a process of sub-conscious abstention from time-off reporting. Employees tend to feel that if they forget to report time off, it will not get recorded. This is often the case.
To resolve this issue companies need to put into place a good process that involves management, with technology to support them. First, everyone should understand the policy as it stands and be committed to adhere to it. Most companies use the requested time-off data as the recorded time-off, which has significant flaws. Often, time-off is not taken or the amount has changed. The ideal scenario would be to use the time-off request as a planning tool so the manager knows their available resources. That time-off taken would then be confirmed by the employee prior to being recorded. This also gives the company the opportunity to ask if other time-off has been taken, hence, making it a conscious abstention for the employee to not report time-off taken.
"In my experience as an HR professional, personal time off has always been a contentious issue for employees and employers. It would be very beneficial to put a good process in place that impacts company morale and the financial health of a company." Jane Seitz- HR Manager.
In summary, time-off is an important piece of compensation for employees to have. It provides for a motivated and healthy organization. However, organizations need to understand the total and type of time-off taken by employees, since any sort of abuse has significant dollar implications to the company.