UNDERSTANDING AND MANAGING SICKNESS ABSENCE

Terry Coulthard andPeter Dewis

PD\ARL\Healthcare 2002

• Introduction

• Background

• Results of IES/UP study

• Case study

• Discussion

• What we did– A detailed case study analysis of a small number of employers to give us a

detailed knowledge of their respective sickness absence and the factors that drive this

• Why we did it– Research by Unum in the US in the early 90’s indicated headline figures for

cost of absence dealt mainly with direct costs only. Full costs were around twice the direct costs at around 10% of salary costs. We wanted to repeat this work in a UK rather than US context.

• Time period– IES commissioned Aug 2000; First results presented Oct 2001

Full report

– Costing Sickness Absence in the UK

IES Report 382

www.unumprovident.co.uk

www.employment-studies.co.uk

The Costs of Absence

Why the concern over absence?

• Lost productivity

• Costs

• Continuity of customer service

• Employers’ duty of care

• Fear of litigation

• Government targets

• Squeeze on ill-health retirement

Ill-health retirements

• Totals £1bn each year in the UK

• Peaked at 40k public servants pa in 1990s

– 39% of all Police retirements

– 39% of all Local Govt. retirements

– 22% of all Civil Service retirements

• In teaching, each ill-health retirement costs over £35k

How serious?

• Average of 7.8 days lost per employee each year (CBI, 2001)

– Public Sector 10.2

– Transport 9.4

– Construction 8.7

– IT 7.2

– Banking/finance 7.0

– Manufacturing 6.9

– Retail 5.8

Published Cost Data

• CBI/Work Foundation £10-12bn

• Civil Service £404m

• Police £210m

• Prison Service £56m

CBI estimate annual cost of £485.60 per employee

Few Cost Absence - why?

• Too time-consuming 35%

• No computerised data 29%

• No accurate records 26%

• No absence problem 23%

• Absence is a problem, but.. 15%

Problems

• Aggregate data only

• No variation by staff group, sector etc.

• Primary focus is on direct costs

• Little account taken of indirect costs and management costs

• No differentiation by duration of absence

Background to UNUM study

Context of study:

Increasing concern among employers

• Growth in long-term illness

Aims of study:

Identify total costs

• Explain variability in costs

Methods:

Case studies

• Analysis of absence data

The nine case studies

Retail store 3

Insurance company 1

Financial services 1

Public sector 2

Law firm 1

Retail group 1

Total 9

Costs by employee group

Absence as % of salary bill:

Low: Managers

Medium: Professional/Technical

High: Sales/Manual

Variable: Admin/clerical

Absence costs per employee

Medium retail store £465

Retail group £497

Regulatory body £809

Law firm £837

Small retail store £861

Insurance company £991

Large retail store £1,268

Financial services co. £1,677

Local authority £2,261

Absence costs as % salary bill

Law firm 1.8%

Regulatory body 2.2%

Insurance company 4.7%

Retail group 6.5%

Medium retail store 6.8%

Financial services co. 7.8%

Local authority 8.2%

Small retail store 11.2%

Large retail store 16.4%

Why do costs vary?

• Proportion of part-timers

• Type of cover organised

• Balance between short & long-term

• Occupational mix

• Age profile

• Adherence to absence policies

Long-term absence

• Stands out as being poorly managed compared with short-term absence

– early intervention

– rehabilitation

• Concern among line managers

• Accounts for between 30% and 75% of total absence costs

• Scope for cost reduction

Full costs formula

Direct Costs = 60%

Indirect Costs = 20%

Absence Management Costs = 20%

Summary

• Existing data on costs inadequate

• Costs range from £465 to £2,300

• Up to 16% of annual paybill

• UNUM figures frequently 300% higher than in-company estimates

• Costs of poorly managed long-term absence is highest (up to 70% of total)

• Direct costs only 60% of total costs

CaseStudy

Case Study

•Male aged 21

•Employed as a clerk in a warehouse

•Salary of £20,233

•He is absent from work suffering from depression

Case Study

•A gradual realisation that the most likely diagnosis is schizophrenia.

•This is likely to be a long standing problem with a poor prognosis of a return to work.

•Benefit at an initial level of £6,600 is insured for over 43 years.

Questions

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