Cost of Employee Absence More than a Third of Payroll

October 21, 2008 ( - According to a new survey of 455 employers conducted by Mercer and sponsored by Kronos Incorporated, employee absence costs organizations the equivalent of 36% of their base payroll on average.

The cost for unplanned employee absences is 9% of their base payroll on average – more than half the cost of healthcare benefits, a Kronos press release said. Survey respondents estimate that when employees are out on unplanned absences, they sustain a loss in productivity of 21%, compared to just 15% for planned absences.

“What this survey shows is that employers can control labor costs and increase productivity by better tracking and controlling their absence-related expenses and minimizing unplanned absences,” said Toni Kellam, absence management consultant at Kronos, in the press release.

Other key survey findings include:

  • Respondents estimate that the total costs for planned absences such as vacations and holidays are equal to an average of 27% of base payroll, including wages, replacement costs, and lost productivity.
  • To help manage unplanned absences, 36% of participants have Paid Time Off (PTO) banks that combine vacation and sick days for nonunion hourly workers, and 35% have them for exempt employees. By contrast, only 29% have PTO banks for nonexempt salaried employees and 28% for union hourly employees.
  • Fourteen percent of employers provide no paid sick time for incidental absences for nonunion hourly workers and 8% provide none for their union hourly workers.
  • The number of incidental unplanned absence days per employee, per year averaged 5.3 days across all employee classes, and ranged from 3.8 for exempts, to 4.9 for nonexempt salaried, to 5.6 for nonunion hourly, and 6.7 for union hourly.

To download highlights of “The Total Financial Impact of Employee Absences” survey, visit .