Sick leave costs business $30 billion – here’s how to cut it back

Businesses lost $30 billion due to employees taking an historic amount of sick leave in 2009-10, with the banking, finance, telco and public service industries the hardest hit, a new survey reveals.

Employers must enforce stringent sick leave reporting schemes, such as medical certificate requirements, and invest in training managers to stop the epidemic, one expert warns.

"Businesses aren't doing enough to manage their sick leave. If they introduce some stringent reporting methods they will be able to stop this from occurring," DHS managing director Paul Dundon says.

The latest Direct Health Solutions Absence Survey reveals the average annual absence rate this year was 9.87 days per employee, or about 4.2% of working time. This is an increase of half a day from 2009, with 36% of businesses reporting an increase in sick leave.

The cost to businesses of sick leave is also rising, with the average cost of absence now at $375 from $370 in 2009. Over the year, that cost comes to $3,712, resulting in the Australian economy losing up to $30 billion a year – 3% of GDP.

Employers also believe deception is afoot, with 15% of employers believing at least half of all sick leave days are not taken for genuine reasons. About 3% believe 80% are taken illegitimately, with 41% believing one in 10 days are fraudulent.

Dundon says the rise in sick leave is due to several factors including the onset of the global financial crisis, which has caused morale to drop and stress to rise, along with poor management as employers shift their focus away from employees and more on the business at large.

"This level of sick leave is the highest we've recorded. Economic factors are behind this, along with some health factors like the onset of the swine flu outbreak which caused a lot of sick leave to be taken."

The survey notes the biggest change in sick leave being taken was in the banking sector, with an 11.17 day average, representing an increase of two days per employee. It claims this increase is related to the rise in stress due to the financial crisis.

"But poor management of sick leave is also a big factor," Dundon says. "Along with poor management of employee health. We're a bit behind the eight ball in terms of how we're supporting our employees in the workplace. They aren't using systems of tracking and monitoring sick leave."

Dundon says employers must practice stringent control of sick leave to crack down on illegitimate claims. The survey notes companies using tactics like reporting schemes and certificate requirements interviews record lower levels of sick leave than businesses not using any methods at all.

"There are several strategies that can be put in place. What businesses need to do is use stringent processes and practices."

Dundon says one of the easiest ways to get around illegitimate sick leave is to introduce a reporting system that makes sense.

"It's very easy to call in sick when you can just leave a message at 3am," he says. "But more strict notification systems can often reduce sick leave."

"You can get around this by having the right kind of monitoring system in place as well. I know that if Paul has had 10 sick days in three months, something is wrong. The problem is people aren't being monitored properly and it's conceivable to take 20 sick days and not be noticed."

While Dundon notes this would happen more in a large company and not among other SMEs, smaller businesses should still use a reporting scheme to crack down on sick leave.

The survey also notes businesses that require a medical certificate "all of the time" recorded 1.3 fewer days of sick leave than those companies that required it "some of the time".

Management training is also a major factor in reducing sick leave, with those organisations providing training towards their managers recording nearly two days fewer sick leave than those companies that weren't providing any sort of training.

The survey also notes about three quarters of unplanned absence are for sickness, but only 28% of employers record the details of that sickness. Dundon says this isn't good enough.

"People are calling in for very minor illnesses, like a mild headache or nausea or something very mild. Whereas if these employees were effectively managing their health they would be able to get rid of that easily, because these aren't usually reasons for a full day of leave."

"What companies are doing is using outsourced providers to give advice to employees, with registered nurses and so on. You have to be medically trained to give advice, so a lot of businesses are just outsourcing it and reducing sick leave that way to stop those mild annoyances becoming sick leave days."