Assignment: The Hidden Costs of Absenteeism and Sick Leave

Question 1

Never Say Never Industries, a 2300-employee firm, has a serious and growing absenteeism problem.  Last year the total  employee-hours lost to absenteeism came to 134,607.  Of the total employees absent,  70 percent were blue collar (average wage $23.60 per hour), 20 percent were clerical (average wage $18.80 per hour), and 10 percent were management and professional (average wage $37.10 per hour).  On average the company spends an additional 38 percent of salary on employee benefits.  Never Say Never Industries has adopted an absenteeism policy that pays workers if they are absent. 

The 58 supervisors (average wage $29.05 per hour) estimate they lose 25 minutes per day dealing with problems related to absenteeism. A typical work year consists of 245 days of work.  The company estimates losses of $268,500 due to lost productivity when highly skilled workers are absent, overtime premiums paid to employees who cover for absent workers, and pay to temporary workers who also help cover for absent workers.  As the HR director for Never Say Never Industries your job is to estimate the cost of employee absenteeism so that management can better understand the dimensions of the problem (use the worksheet provide at the end of this assignment). 

Question 2

We Three Kings, Ltd., is a 750 employee firm faced with a 4.2 percent annual absenteeism rate.  Employees are scheduled to work 1,960 hours.  About 25 percent of absentees are blue collar (average wage $22.15 per hour), 60 percent are clerical (average wage $19.90 per hour), and 15 percent were management and professional (average wage $39.50 per hour).  We Three Kings, Ltd. also spends on average 40 percent of each employee's salary on benefits.  Employees at We Three Kings, Ltd. are not paid when they are absent from work. 

A total of 30 supervisors (average wage $27.65 per hour) estimate that managing absenteeism problems requires about one hour per day for each of the 245 days per work year.  The firm also estimates $198,000 more is spent on other expenditures related to absenteeism, including temporary workers, overtime pay, and lost productivity.  Determine how much absenteeism is costing We Three Kings, Ltd. (use the worksheet provided at the end of this assignment).

Question 3

Management has decided that the cost of absenteeism at Never Say Never, Inc. must be reduced.  As an outside consultant you have been retained to do two things.  One, prepare a detailed  outline of the information you would include in a presentation to Never Say Never, Inc.'s management that will help the managers better understand why employees are absent from work.  Two, recommend two detailed programs for reducing absenteeism at Never Say Never, Inc.