Employers responding to the survey estimate that the additional indirect costs of replacing absent workers can be as much as half of the direct costs.
While more than half (58%) believe they should measure the indirect costs of those absences, just 16% have tried to do so according to the survey by HR consultant William M. Mercer and sister firm Marsh.
For example, an employer with 5,000 employees earning an average of $40,000 a year, 14% of pay amounts to $5,600 per employee – a total of $28 million – while indirect costs represent another $14 million drag on the bottom line.
The total direct cost of unscheduled absence plans represented 3.9% of payroll in 1999, an adjusted 5% increase from 1998 levels. Nearly two-thirds (65%) of the survey respondents are concerned about controlling unscheduled absences, where indirect costs tend to be more substantial than for planned absences.
Unscheduled absence plans typically include:
- sick days
- salary continuance
- short- and long-term disability
- workers’ compensation.
The study of 433 employers did find that 60% of responding employers believed that time-off and disability benefits help attract new employees, and one in 10 said that shortfalls in their time-off and disability benefits actually hindered recruiting.
More than half of larger employers, those with 5,000 or more workers, are focused on reducing current costs, compared with only a third (35%) of those with 500-4,999 employees. On the other hand, the smaller employers are somewhat more focused on controlling future costs (41% versus 37% among larger employers).
Nearly a third (31%) of large employers are taking steps to coordinate medical care with occupational and non-occupational disability management, while only a fifth (21%) of mid-sized employers are doing so.
Almost half (45%) of larger employers have already integrated their short- and long-term disability benefits with one carrier or administrator.
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