Companies Fail to Track Leave of Absence Costs

July 26, 2004 (PLANSPONSOR.com) - Leave of absence (LOA) policies are nearly universal, but calculating the costs associated with these plans is done by only a minority of companies.

Less than two in 10 companies tabulate costs associated with LOA polices and only 33% track leave utilization. However, 96% of the 450 larger companies studied by human resources outsourcing and consulting firm Hewitt Associates have LOA policies in place. When asked why they did not track these costs, companies said it was due to lack of resources (34%), the issue not being a top management concern (20%) and the lack of an established methodology to generate meaningful results (17%).

“In an age where companies are asked to identify and cut expenses wherever possible, it is surprising to find that so few organizations have a sense of how many of their employees are on leave at any one time and how much it’s costing them,” noted Richard North, absence management strategy leader with Hewitt.

Further, while nearly all employers have formal LOA policies in place, less than one-third consistently follow them, and approximately one-fourth have LOA practices and policies that differ based on collective bargaining agreements, division, length of service, location and exempt/non-exempt status.

Not surprising then, nearly all surveyed companies (94%) allow employees to take leaves of absence for reasons beyond those legally mandated, including: for one’s own (non-FMLA) health condition (7%) or for personal reasons (4%). Overall, the most common reasons for taking leave arise from the Family and Medical Leave Act (FMLA), including for one’s own serious health condition (46%), for the birth of a child (23%) and for the serious health condition of a close relative (9%).

“Policy variations and inconsistent application complicate the LOA process and can lead to potential problems such as compliance and employee relations issues,” said North.

Most large employers (77%) realize their tracking of these costs needs to be improved. Nearly 70% still use paper records to administer their programs, and only 56% have automated any portion of administration or communication. However, those most satisfied with their performance had more centralized systems.

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