Is Absenteeism harming your business? Probably!

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Overview of the effects of absenteeism on a business and the harm that the business would suffer if its absenteeism was not effectively managed.

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Is Absenteeism harming your business? Probably!

  1. 1. Is Absenteeism harming your business? Probably! Human Resources, Labour Relations and Payroll Specialists
  2. 2. May 2014 People Management Simplified 2 What is Absenteeism? Employees have a duty to present themselves for work at a given time for a specified duration during which time they are required to perform the duties and functions they are employed to perform. Should an employee fail to present themselves for work as scheduled, or not be present at their workplace for the full duration of their shift, then such an employee is “absent from work”.
  3. 3. May 2014 People Management Simplified 3 What is “Presenteeism”? This occurs when employees are physically present at the workplace, but not engaged, mentally or physically, in the work they are employed to perform. This is also a form of absenteeism!
  4. 4. May 2014 People Management Simplified 4 Why must Absenteeism be managed? Absenteeism is extremely expensive and can harm a business! Did you know that South African companies suffer costs of between 6% and 10% of payroll because of absenteeism, with some estimates putting its cost at R20- billion a year?
  5. 5. May 2014 People Management Simplified 5 Medical Industrial Economic Interpersonal Social Organisational Genuine illness/Injury Strike Low wages Conflict/poor interpersonal relationships Poor Work ethics Corporate culture & climate Insufficient muscle strength (malaise) Stay away High debt Lack of recognition for contribution Norms / expectations of society Poor management Vision or hearing impediments Short time/Lay off High food cost inflation Lack of compassion and understanding Perception of sick leave and family responsibility leave as rights Low morale Alcohol / drug addiction Intimidation High transport costs Lack of trust Fraud and abuse of sick leave is rife Inadequate training for job Protection offered by legislation – invites abuse Moonlighting- fatigue Sick children / relatives/ extended family Availability / amount of leave Commuting problems Threats to job security Factors influencing Absenteeism
  6. 6. May 2014 People Management Simplified 6 Types of Absence - 1 Statutory Absence These types of leave are prescribed and regulated by legislation, and the employer is obliged to grant such leave subject to certain conditions being satisfied. Paid Unpaid Annual leave Maternity leave Public holidays Sick leave Family responsibility leave I.O.D./Occupational Diseases
  7. 7. May 2014 People Management Simplified 7 Types of Absence - 2 Other Absence types Paid Unpaid Paid Absence Unpaid leave Study Leave Industrial action (Work stoppages/Strikes) Training Short-time/Lay-off Business
  8. 8. May 2014 People Management Simplified 8 Types of Absence - 3 Absence due to misconduct Paid Unpaid Late coming/Leaving early/ Tardiness (undetected) Late coming/Leaving early/ Tardiness (detected) Extended breaks (tea/lunch/toilet) AWOL Loitering Personal phone calls/e-mails Social media/internet
  9. 9. May 2014 People Management Simplified 9 What does Absenteeism cost? Let us do some calculations… Sample Business model used in calculations Headcount = 50 employees (25 male/25 female) Average Salary = R7 500.00 p.m. Working hours = 8 hours/day - 5 days/week Annual Salary bill = R4 500 000.00
  10. 10. May 2014 People Management Simplified 10 Direct Cost exposure of Statutory Absence This table reflects the costs the sample business would be exposed to if all its employees utilised their full annual entitlements. This is the worst case scenario and ultimately the risk that has to be managed. Type of Leave Leave Entitlement Days/Employee/p.a. (In terms of B.C.E.A.) Maximum exposure Man-days p.a. Maximum exposure Cost p.a. % of Salary Bill Annual Leave 15 750 R259 615 5.8% Public Holidays 12 600 R207 692 4.6% Sick Leave 10 500 R173 077 3.8% Family Responsibility Leave 3 150 R51 923 1.2% Total p.a. 40 2000 R692 307 15.4%
  11. 11. May 2014 People Management Simplified 11 Direct Cost exposure of Other Absence types This table reflects the costs the sample business would be exposed to by other reasonable absence types that are common in similar organisations. Absence Type Number of employees Number of incidents Duration of incidents (each) Absence Man-days p.a. Absence Cost p.a. % of Salary Bill Maternity Leave 1 1x p.a. 4 months 87 0 0 AWOL 2 1x p.m. 1 day 24 0 0 Unpaid leave 2 1x p.m. 1 day 24 0 0 Study leave 2 1x p.m. 1 day 24 R8 308 0.18% Training 4 5x p.m. 1 day 240 R83 077 1.85% Business 5 2x p.m. 4 hours 60 R20 769 0.46% Total p.a. 459 R112 154 2.49%
  12. 12. May 2014 People Management Simplified 12 Direct Cost exposure of Absence due to misconduct Infraction Type Number of employee s (Ave.) Number of incidents Duration of incidents (each) Absence Man-days p.a. Absence Cost p.a. % of Salary Bill Arriving Late 10 2x p.m. 10 minutes 5 R1 731 0.04% Leaving Early 15 3x p.m. 10 minutes 11 R3 894 0.09% Tardiness 10 5x p.m. 15 minutes 19 R6 490 0.14% Extended breaks 25 10x p.m. 5 minutes 31 R10 817 0.24% Loitering 10 5x p.m. 10 minutes 13 R4 327 0.10% Personal phone calls/e-mails 25 Daily 20 minutes 250 R86 538 1.92% Social media/ Internet 25 Daily. 30 minutes 375 R129 808 2.88% Total p.a. 704 R243 606 5.41% This table reflects the costs the sample business would be exposed to by absence due to misconduct. (As experienced on average in similar organisations).
  13. 13. May 2014 People Management Simplified 13 Total Direct Cost exposure due to Absence This table summarises the annual costs the sample business would be exposed to based on the previous examples. This would represent the potential risk that the model business is exposed to. Absence Type Absence Man-days p.a. Absence Cost p.a. % of Salary Bill Statutory Absence 2000 R692 307 15.4% Other Absence 459 R112 154 2.49% Absence due to Misconduct 704 R243 606 5.41% Total p.a. 3163 R1 048 067 23.3%
  14. 14. May 2014 People Management Simplified 14 Cost of Absenteeism Interpreting these numbers - 1 The monetary cost at over R1 million p.a. would definitely be harming the model business, but the other factors are equally disturbing. If the absenteeism was at 23.3%, then it means that the maximum possible business performance would be limited to 77% of capacity, which would also definitely be harming the model business.
  15. 15. May 2014 People Management Simplified 15 Cost of Absenteeism Furthermore, if all employees were effectively utilised, then the 3163 lost man-days theoretically indicates that if the utilisation was 100%, then the business would be overstaffed by 12 employees! The cost of having these additional employees on the payroll would also definitely be harming the model business. Interpreting these numbers - 2
  16. 16. May 2014 People Management Simplified 16 Cost of Absenteeism Surprised by these huge costs? It gets worse!
  17. 17. May 2014 People Management Simplified 17 Cost of Absenteeism The Direct costs described in the previous slides only relates to the costs incurred compensating employees for being absent, i.e. for doing nothing! What about the contribution those employees would have made had they been present at work? The work still has to be done!
  18. 18. May 2014 People Management Simplified 18 What are the options to get the work done? - 1 Cost of Absenteeism • Get co-workers to absorb the work without compensation, and incur their wrath in doing so! • Do nothing. Let the work wait until the employee resumes work, and thereby cause knock-on delays downstream, and possibly incur the wrath of your customers!
  19. 19. May 2014 People Management Simplified 19 What are the options to get the work done? - 2 Cost of Absenteeism • Employ additional/temporary staff to perform the work and incur additional labour costs. • Work overtime to get the job done at a premium cost!
  20. 20. May 2014 People Management Simplified 20 Indirect Cost exposure due to Absence Whichever option you choose to get the work done it is going to cost you extra money! Experts estimate that the real cost of absenteeism is a whopping 300% of the direct costs! This is based on the direct costs, replacement labour costs, the loss of productivity, and the reduction in overall business performance. Immeasurable is the cost of letting your customers down!
  21. 21. May 2014 People Management Simplified 21 Cost of Absenteeism Cognisance must also be given to the other lost time that a business experiences in the normal course of its operations that reduce performance, such as setup/tear-down times, shift handovers, mechanical/ electrical breakdowns, stock shortages etc. Other factors reducing business performance Taking these into consideration together with the time lost due to absenteeism, the model business would probably be operating at about 50% of its capacity, and is unlikely to survive!
  22. 22. May 2014 People Management Simplified 22 Time to ask the question again: “Is Absenteeism harming your business?” Probably! Absenteeism
  23. 23. May 2014 People Management Simplified 23 Conclusion We hope that you found the information set out in this presentation useful and that it will assist you to manage absenteeism in your organisation. If not … PAY MATTERS is able to assist you to reduce your operating costs by managing absenteeism effectively, and we look forward to the opportunity. Continue viewing the slideshow to learn more about us, or visit our website http://www.paym.co.za Alternatively Submit your enquiry by e-mail, and we will contact you info@paym.co.za or Call George : Mobile 082 572 0644 - Landline 041 452 3702
  24. 24. May 2014 People Management Simplified 24 Who is Pay Matters? PAY MATTERS is a Human Resources Solutions provider located in Port Elizabeth, South Africa, that offers a comprehensive range of affordable, high quality, legally compliant, and reliable shared Human Resources, Labour Relations, and Payroll solutions to Corporate, SMME and Domestic employers within the Nelson Mandela Bay Metropole area, (Port Elizabeth, Uitenhage and Despatch), and surrounds.
  25. 25. May 2014 People Management Simplified 25 PAY MATTERS’ Shared Services Allow us to assist you to administer your Human Resources, Labour Relations and Payroll while you focus on your core activities. Enjoy the many benefits of having a professional Human Resources Department working for you at an affordable cost! We are confident that, due to our expertise, 39 years of demonstrated on-the-job experience, flexible range of services, and our method of conducting business, we can add value to most employers, and look forward to providing a tailor-made solution for you. We believe that by entrusting your business to PAY MATTERS you can rest assured that the services we provide will be legally compliant, and that your employees will be paid correctly and timeously each payday, while your assets and business interests will be protected.
  26. 26. May 2014 People Management Simplified 26 Our services include a selection of Human Resources, Labour Relations, Payroll and other supplementary services, that are offered either independently or in combinations to allow flexibility, and eliminate unnecessary costs. Furthermore, in each of these categories, PAY MATTERS offers three levels of service, being Primary, Enhanced and Premium. This additional flexibility allows PAY MATTERS to provide an employer with a tailor made package designed specifically to satisfy their needs. Our integrated systems and processes are designed to maximise individual contribution and thereby enhance business performance. Our method of people management is proactive rather than reactive, thus ensuring employee satisfaction, and resulting in stability and harmony in the workplace. What services does PAY MATTERS offer?
  27. 27. May 2014 People Management Simplified 27 • Strategic Planning • Due diligence/process audits • Organisational Structuring • Workforce Planning • Development/Review of Policies & Procedures • Development/Review of Workplace Rules • Development/Review of Job Descriptions • Development/Review of Job Grading structure • Performance Management • Absence Management • Skills Audits/Gap Analysis • Skills Development Plans • Employment Equity Plans/Reports • Employee Satisfaction Surveys • Remuneration package structuring • Incentive Reward Systems • Market Surveys/Benchmarking • Wage negotiations • Facilitation/Mediation • Chairing of Disciplinary/Appeal Hearings We Specialise in:
  28. 28. May 2014 People Management Simplified 28  Provide access to specialist skills and knowledge that improves the overall efficiency of the organisation;  Provide premium services at an affordable cost;  Provide the option of a "one-stop" solution to satisfy most Personnel Management requirements;  Enhance business performance by as much as 30%;  Protect an employer’s interests and minimise their risk exposure by ensuring efficient controls and legal compliance;  Relieve an employer from the administrative burden associated with payroll and human resource management;  Promote harmony and stability in the workplace; and  Protect employee interests by ensuring that they are managed fairly and correctly, and that they are paid accurately and timeously. PAY MATTERS’ services are designed to:
  29. 29. May 2014 People Management Simplified 29 Last but not least
  30. 30. May 2014 People Management Simplified 30 Thank you for your time We look forward to being of service to you Absenteeism

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