Business strategy models can be put in place to prevent employee absence, as Matthew Haswell discusses in this TV show.

Absence prevention business strategy models

Well the first side, the first thing to do is try and import procedures that are actually going to prevent absence in the first place. Now that doesn’t necessarily relate to immediately spending money, that can be a kind of training and an approach basis. A lot of sickness is recurring, getting to the background of why that sickness is occurring, getting managers to be able to talk to their staff about sickness and absence and looking at patterns, the way sickness is recorded can actually throw up into light certain patterns of illness, it may be from a certain department has reoccurring illnesses, it may even be within a department those under a particular manager have certain recurring absences. That’s something that isn’t exactly a huge cost but it is just a procedural change. And also the culture and value system of the employer has a relation between that and sickness absence. Inside Finance is very interested in innovative business strategy models and will continue to bring you expert discussion on the subject.

The financial impact of employee sickness has more factors than the cost of salary cover. In this TV show Matthew Haswell discusses the high cost of absence.

Quantifying the financial impact of employee sickness

Various studies and research has been conducted on trying to quantify the cost of absence, it’s very difficult to quantify the cost of absence but a couple of pieces of research have been done by the CIPD, the confederation of British industry, various insurance companies and companies that are dealing in health and wellbeing, as a very broad brush cost perhaps up to three billion pounds a year is lost by UK business in terms of sickness absence. Now when you break that down across the employees in the country that works out at about £600 per employee per year, so if you’ve got 1500 employees, £600 per year is likely to be your cost to you as an employer for sickness and absence. Now those costs aren’t just the cost of paying sick pay, because those costs, depending on contracts for employment and sick pay policies, won’t necessarily be particularly onerous, but in conjunction with other factors and other costs associated costs, I mean if someone goes off sick, particularly if they’re off long term sick, their work doesn’t disappear, you have to have someone to actually fill that gap, especially if they’re a, I don’t know, a senior person in IT or a sales person, there’s loss of productivity, there’s if you want to get short term staff to come in and do their work, there’s a salary cost to them, disruption of the business, training, time, people committing time to actually train new people and find their way. And also there’s a lag of course as well because a new person won’t just pick up and run with someone’s work who’s off sick. So the cost isn’t just necessarily the payroll cost or the salary cost of all of the sickness absence cost, it’s the associated business cost as well

Browse Inside Finance TV for more detailed examples of common issues that can have a considerable financial impact on a business.

 

The person centred planning that is done in the HR department should include issues like absence. In this video Matthew Haswell discusses how employee illness drains employers’ pockets.

HR management does person centred planning

Employee sickness is something that ultimately impacts on employers and it impacts on employers pockets ultimately. There’s the financial impact and also the loss of productivity impact as well, which ultimately can be financial as well. Sickness management can be done in several ways, you either mitigate sickness absence or you insure against the cost of sickness absence, but either way solutions to sickness absence are very relevant to business directors and HR directors and business owners alike.

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A business benefits from having insurance when it helps them cover the cost of sick pay. In this TV show Matthew Haswell discusses insuring against employer liability.

A business benefits from preparing for the unknown

On the other side if you do have particular sickness absence, you can insure against the liability for the employer to pay the costs. Now you can insure individual salaries so that if an individual is off sick the employer is able to maintain a percentage of their salary by way of insurance, an insurance product will actually pay the employer the employee’s salary and then the employer can pass that onto the employee. So the employee remains as an employee, remains able to participate in other benefits, but the employer is protected against the cost of maintaining that salary. And really that goes back to the old reason of why do we have insurance and the reason for that is because you’re paying a known or a premium that you can keep a handle on against the unknown cost of the liability. So it’s really a known cost of insurance versus an unknown cost of liability and that’s something that’s picked up by finance directors and having a known cost for several years in the future of insurance compared to the unknown cost of absence is a comforting thing. And quite often some of these insurance products will have associated benefits. For example income replacement insurance quite often comes with a product called an employee assistance plan, which essentially is a telephone based and an online based resource that employees can access relating to questions regarding health, stress, anxiety, medical issues and quite often that includes face to face counselling as well and the insurance companies tend to provide that because any, I think whilst it may be seen as a freebie obviously the insurance company like to think that those associated products will have a positive impact on absence, therefore they won’t have to pay out too much in claims.

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