Absence may make the heart grow fonder, but in the business world it clearly makes the costs grow higher. The cost of sickness in the workplace is calculated to be a massive £l l billion a year – and this is seen by some as a conservative estimate. Absenteeism is a growing problem, and one that is now being tackled at the highest levels.
Chancellor of the Exchequer Gordon Brown, recently highlighted the problem in his recent report on the economy.
Brown has made it clear he is committed to reducing absence levels in the UK – particularly in the public sector where rates are much higher.
The Confederation of British Industry (CBI) calculates that 197 million working days were lost through sickness and absence last year.
This works out at an average of 8.4 days a year off work per person. This may not seem much, but for every worker, employers are forking out £478 for the time they are off work.
Some insurers say the real costs are even higher. PPP healthcare says that the CBI figures only show the cost of absence – in fact the real cost could be almost twice as high. Many firms do not calculate the cost of hiring temporary staff and paying overtime to cover for the absent workers, as well as the potential effect on productivity and lost customers if the company is not firing on all cylinders.
Dudley Lusted, director of corporate healthcare at PPP healthcare, claims British companies are not working hard enough to tackle this problem.
“CBI sickness absence data is leading to complacency. The national average of 3.7% absence – which costs £l 1 billion – seems to have become the norm,” he comments.
Lusted claims companies can reduce these costs significantly, and achieve sickness absence levels of less than 2%.
But while insurers, the CBI and the Government all agree absence is a problem, there are different opinions as to how it should be solved.
Lusted says firms should make a distinction between short term absences and long term sickness.
He says: “Most well run companies have short term sickness absence under control. The next big opportunity for savings is through better management of long term sickness absence. This is where the industry should now be focusing its efforts.”
Lusted differentiates between what he calls “malingerers”, short term absence and longer term problems, where workers are off work for at least 10 days.
PPP has launched a PMI policy aimed at reducing the cost of these longer term absences.
The “Back to Health” policy only offers cover for more severe conditions, so it will not pay out for less serious problems, such as wisdom teeth operations, where employees are unlikely to be off work for any length of time.
Rather than a GP’s referral for treatment, approval is given by the employer’s occupational health physician.
PPP argues that every workplace is different, and it is the occupational health worker who will be best placed to understand how any illness will impact on the employee’s work.
So long as the health worker recommends treatment, the insurer will pay for private care.
And, obviously, as there is only limited cover, this is a much cheaper policy for companies to buy. Lusted estimates the premium is just £110 an employee a year as opposed to around £300 with an average PMI policy.
But PMI products are only part of the solution. Other insurance policies such as dental and income protection cover also help reduce some forms of absenteeism.
Many insurers argue dental insurance can help reduce the so-called “malingering” where employees may take frequent sick days. Visiting the dentist is one of the most frequent reasons used to take time off, so employers hope that providing free care through work, will reduce this.
In contrast income protection can help reduce long term illness or disability. Insurers such as Unum and Generali now operate rehabilitation programmes designed to help these employees back into work.
Most insurers claim that early intervention is crucial if workers are to return to employment.
This “managed healthcare”, as it is known, is thought to be beneficial for the worker as they receive the treatment that they need as quickly as possible, rather than waiting six months or so until statutory sick pay kicks in.
And this approach has also proved beneficial for employers and insurers. Employers are not faced with a drop in productivity or staffing problems, and, if staff return to work, insurers are not faced with hefty bills.
These policies all go some way to providing a solution to this problem. But before companies – or advisers – can work out what is suitable, they have to evaluate the problem.
Wide sweeping measures to reduce absenteeism throughout an organisation can prove fairly futile, according to BUPA.
The insurer suggests that first any company has to look at what types of absenteeism is occurring and in what areas of the company.
Lesley Cooper, head of health management consultancy at BUPA says: “Companies can have quite average absence rates, but when this is analysed closer it can mask very good records throughout most of the company and extremely high levels in just one department.”
Companies like BUPA and PPP, as well as specialist health brokers, such as Aon, Gissings and Sedgwick Lowndes, offer consultancy service to help companies identify these problems, before recommending specific insurance solutions.
Cooper says: “Generally this is a far more effective use of resources and produces better results. Companies spend less and achieve more – which is something they are always interested in.”
To identify these specific needs, insurers recommend companies carry out thorough auditing to locate sickness and absence problems.
These audits are usually done by staff questionnaires.
Cooper says: “Ideally companies will run two extensive questionnaires, one looking at possible medical problems and history, and one to determine more psychological problems, such as stress.”
She adds: “In many cases these two are interlinked – and some stress problems at work could be driving absence through sickness. Stress can lead to some fairly simple short term problems such as feeling run down and taking frequent odd-days leave. If this is spotted and acted upon this could prevent more long term problems developing.”
Copper says that she does not generally accept definitions such as “malingerers”.
“This tends to imply that there are cases of genuine absence and non-genuine absence.
“There are clearly some reasons why these “malingerers” are not coming into work – be it stress, harassment, bullying or simply problems at home.
“If companies and insurers can identify these reasons, then they can work with staff to reduce this problem.” She adds that at the end of the day it still costs companies as much whether their staff are off with a bad back or a bad attitude.
But many companies may be unwilling – or unable – to undertake expensive audits. Cooper says that in many cases companies do keep a lot of data and records that can help determine this information.
She adds: “In many cases this information is not utilised – but can be enormously useful to companies in reducing their sickness absence levels.”
In many cases the causes of absence tend to be relatively straightforward – with between 60-70% of all incidents caused by either stress or muscular skeletal problems, mainly back pain. Copper adds: “Initially most companies are interested in measures that identify absence problems and help reduce them. But over the long term, preventative measures stop these incidents occurring in the first place and can help change the business culture. Although these long term measures are not instantly as cost effective.”
However, healthcare consultancy Gissings adds that companies need to look at more than just insurance solutions.
Paul Farrell, senior manager of healthcare says: “We look for a more holistic approach, that ties in insurance and risk management with training, health and safety initiatives, human resources strategy and even aspects such as pay and appraisals.
“Generally in companies these aspects of corporate life are handled by different people and departments and the issue of absence can sometimes just drop through the middle of everyone.”
He adds: “This is not just a question for senior management and consultancy staff to discuss – it should go right down to individual line managers.”
Gissings advocates its Integrated Management Absence and Health programme – known as IMAH.
This programme suggests that the problem of sickness and absence should be centrally managed.
Farrell argues that not only will this help improve absence levels, but this proactive approach can be developed to improve recruitment as well as reduce the cost to pension funds of ill health early retirement – and so should be a central part of the company’s management structure.
He adds: “This is a problem that affects many companies. It has to be tackled on the highest level as a serious management issue. But training and information must also filter through the organisation to help transform a sick working culture into more health working atmosphere.”