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Unplanned Absence Costs Organizations 8.7 Percent of Payroll, More than Half the Cost of Healthcare, According to New Mercer Study Sponsored by Kronos®

SAN DIEGO SHRM Annual Conference June 28, 2010Kronos® Incorporated today announced the results of a new survey conducted by human resource consulting firm Mercer on behalf of Kronos that looks at the total cost of employee absence. This survey is an update to the 2008 survey on the same topic.

News Facts

  • The combined total costs for incidental and extended disability absences — the kinds of absences employers try to minimize — add up to 8.7 percent of payroll. This figure is more than half the cost of healthcare, measured at 13.6 percent of payroll in Mercer’s 2009 National Survey of Employer-Sponsored Health Plans.
  • The total costs of all major absence categories— including direct and indirect costs —average 35 percent of base payroll. These costs range from 29 percent for exempt employees, 36 percent for nonexempt salaried, 39 percent for nonunion hourly, and 38 percent for union hourly.
  • Incidental unplanned absences also result in the highest net loss of productivity per day (i.e., work that is missed or postponed by not being covered by others): 19 percent versus 13 percent for planned absences and 16 percent for extended absences.
  • The number of incidental unplanned absence days per employee per year averaged 5.4 days across all employee classes, and ranged from 3.9 for exempts, to 4.9 for nonexempt salaried, to 5.8 for nonunion hourly, and 7.3 for union hourly. 
  • While other surveys have identified the direct costs of certain types of absences such as vacations, holidays, and disability benefits, the Kronos/Mercer survey is the only large-scale attempt to identify the total costs of absence. The report analyzes costs  in terms of the class of employee (exempt, nonexempt salaried, nonexempt hourly, and union hourly) and the type of absence (unplanned, planned, and extended).
  • The Survey on the Total Financial Impact of Employee Absences was conducted online in the spring of 2010. A total of 276 organizations responded from all major industry segments, sizes, and regions throughout the U.S. Visit the Kronos website to download the full report.

Supporting Quotes

  • Michele Deziel, senior director, core product line, Kronos
    "Senior leadership within most organizations is often not aware of the full cost of employee absence. It is seen as un-measurable or dismissed as negligible. While most other expenses for an organization are closely monitored, employee absence is loosely tracked, and the tracking is not thorough enough to reveal the full costs. What this survey shows is that employers can control labor costs and increase productivity by better tracking and controlling their absence-related expenses and minimizing unplanned absences."
  • Michael Klachefsky, principal, absence management practice leader, Mercer
    "Employers tend to focus their energies on controlling healthcare costs, since the dollars are more easily measured, and they are rightly concerned about what health care reform will do to their budgets. This second survey confirms our original findings that large opportunities exist for cost reductions and increased productivity if employers also pay more attention to tracking and managing absences."

Supporting Resources

  • About Mercer
    Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer's investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit www.mercer.com.

About Kronos Incorporated

Kronos is the global leader in workforce management solutions that enable organizations to control labor costs, minimize compliance risk, and improve workforce productivity. Tens of thousands of organizations in 60 countries — including more than half of the Fortune 1000® — use Kronos time and attendance, scheduling, absence management, HR and payroll, hiring, and labor analytics applications. To learn how Kronos uniquely delivers complete automation and high-quality information in an easy-to-use solution, visit www.kronos.com.

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© 2010 Kronos Incorporated.Kronos is a registered trademark of Kronos Incorporated or a related company. All other trademarks are property of their respective owners.

Contact
Laura Souza
Kronos Incorporated
+1 978.947.4777
laura.souza@kronos.com

Bruce Lee
Mercer
+1 212.345.0553
bruce.lee@mercer.com 

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