Survey Highlights Complexity of Employee Absence Management

Employers are finding it increasingly difficult to effectively track employees’ collective absences, the reasons for those absences, the total costs associated with lost productivity and health and disability benefits.

In an effort to simplify the leave of absence (LOA) process, a new survey by Hewitt Associates, a human resources consulting and outsourcing company, reveals that more employers are streamlining the management of employee absenteeism by shifting the administration of their LOA programs to internal, dedicated groups or to an outsourcing partner. In addition, a number of companies are adopting total absence management programs, which bring together traditionally separate absence-related policies and benefits programs that enable employers to gain a more comprehensive view of the driving factors behind employee absenteeism.

Hewitt’s survey of 225 large and mid-size companies found that three-quarters (75 percent) do not feel they are administering LOAs well, and only about a quarter (26 percent) said their LOA policy is followed all of the time. To encourage consistent use and administration of these programs, a growing number of employers are consolidating the administration of their LOA programs to internal LOA groups or to an outsourcing partner. According to Hewitt’s research, almost half (42 percent) of employers have completely centralized their LOA administration, and 30 percent have outsourced their LOA program management, an increase of 13 percentage points in the last five years. In addition, about 30 percent of employers now offer a total absence management program. Among those companies that outsourced their LOA administration, 93 percent said their administration was more consistent and 76 percent reported that the distribution of required notifications was more timely.

“Due to the increasing complexity of the absence management space, it has become difficult for companies to manage and track employee absences from several disparate HR departments. What’s more, many companies don’t have the time or resources required to effectively manage employee LOAs,” explains Kim Stattner, a leader in Hewitt Associate’s absence management practice. “As a result, we're seeing an increase in outsourcing and/or the use of dedicated groups within an organization to manage these programs, in addition to more total absence management programs. All of these options allow employers to eliminate overlap across programs, simplify and streamline LOA processes and curb employee misuse by better tracking employee absences.”

Estimating LOA-Related Costs

According to Hewitt, the lack of consistent administration and ineffective program management is potentially costing companies millions of dollars every year in payroll expenses. For example, employers participating in Hewitt’s survey reported that, on average, 8 in every 100 of their employees experienced an LOA in a given year, with the average absence lasting about 42 days. For an employer with 20,000 employees, that adds up to a total of 67,200 days lost to LOAs each year -- the equivalent of 260 full-time employees not working for an entire year -- or almost $13 million lost annually in productivity. Nevertheless, Hewitt’s survey shows that a large number of employers -- 69 percent -- have never even attempted to calculate the costs generated by employee absences.

“While employers inherently understand that absenteeism affects productivity, it’s concerning that many do not take the time to understand how drastically LOAs can affect their bottom line, particularly because employee absenteeism can cost employers just as much -- if not more -- as health insurance benefits,” said Stattner. ”By taking the time to measure the losses to productivity incurred when employees experience an LOA, companies will not only be able to streamline the LOA process and get employees back in the office sooner, but they’ll also be able to cut down on their overall health care spend by saving on costs associated with employee absenteeism.”

Impact of New Family Medical Leave Act (FMLA)Regulations

According to Hewitt’s survey, most companies have tailored their LOA programs to meet the FMLA’s eligibility requirements for length of service (96 percent), minimum hours (93 percent) and covered relationships (88 percent), since the legislation was enacted 15 years ago. Still, employers report that they are still struggling with compliance, and the newly announced FMLA regulations impose a tremendous burden on employers. Companies must begin following the revised rules as of Jan. 16, 2009, giving them little time to make the necessary administrative changes. However, Hewitt’s survey showed that 83 percent of employers that centralized LOA administration noted improved compliance with laws and regulations, and 87 percent who outsourced the function saw improvement with compliance as well.

“Since its inception, FMLA has generated a great deal of attention and controversy in the workplace, particularly since employers still have lingering questions about compliance issues,” Stattner noted. “The speed at which the new FMLA regulations take effect add another layer of complexity to an already difficult process, and employers will have to work diligently to ensure their absentee programs comply with the latest rules. However, employers that have already taken steps to streamline their absence management programs through centralization and/or outsourcing are one step ahead in getting a handle on the complexities of the legislation and acting accordingly.”

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