How to calculate the cost of sickness absence in your business

Two articles this week perfectly illustrate the dilemma of businesses trying to assess the return on any investment in stress management initiatives.

The first article reported “A wellbeing pilot at Legal & General which focused on stress and mental health reduced sickness absence by 15 per cent.” People Management

The second stated that “83% of the employers polled did not provide stress management advice and support ..” Personnel Today

If you are one of the 83% of businesses who has no stress management advice and support in place yet you have sickness costs, then you need to consider the following questions:-

How much did sickness absence cost your business in the past year?

This is a figure all businesses should know. Here is a simple calculation:-

Lost Time Rate – which can be calculated for each team, department, employee etc

Total absence (hours or days) in the period x 100
Possible total (hours or days) in the period

You can then take the average salary and calculate how much the lost time has cost.

You may also want to add into this calculation the costs of temporary staff cover, management time relating to this absence, health insurance costs, lost production etc. You can make the calculation as simple or as comprehensive as you want to.

How much would a 15% reduction in sickness absence save your business in a year?

Using the figure above for the total cost of absence, calculate how much a 15% saving would be.

How often are your employees taking sickness absence?

This calculation will show the number of sickness absences, but does not take into account the length of the absence:-

No of spells of absence in the period x 100
No of employees

Who is taking short, frequent absences?

The Bradford Factor calculation shows the employees who are frequently off sick:-

S x S x D

S = number of spells of absence in 52 weeks taken by an individual
D = number of days of absence in 52 weeks taken by that individual.

For example:

10 one-day absences: 10 x 10 x 10 = 1,000 whilst 1 ten-day absence: 1 x 1 x 10 = 10

5 two-day absences: 5 x 5 x 10 = 250 whilst 2 five-day absences: 2 x 2 x 10 = 40

Armed with this information, you can start to see how to direct your investment into health and wellbeing initiatives. Stress is the largest cause of absence, so a stress management programme is a good place to start. If you could reduce your sickness absence rates by 15% how much better off would your business be?

There are further case studies showing how a variety of businesses have saved money by investing in health and wellbeing initiatives – Health and Safety Executive

This post was written by Charlie Damonsing of CLAssociates. CLAssociates specialises in helping businesses manage stress in the workplace, providing consultancy, training and 1-2-1 support. For further details please contact Charlie on 0771 559 6487.