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UNDERSTANDING AND MANAGING SICKNESS ABSENCE Terry Coulthard and Peter Dewis

UNDERSTANDING AND MANAGING SICKNESS ABSENCE Terry Coulthard and Peter Dewis. PDARLHealthcare 2002. Introduction Background Results of IES/UP study Case study Discussion. What we did

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UNDERSTANDING AND MANAGING SICKNESS ABSENCE Terry Coulthard and Peter Dewis

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  1. UNDERSTANDING AND MANAGING SICKNESS ABSENCETerry Coulthard andPeter Dewis PD\ARL\Healthcare 2002

  2. Introduction • Background • Results of IES/UP study • Case study • Discussion

  3. What we did • A detailed case study analysis of a small number of employers to give us a detailed knowledge of their respective sickness absence and the factors that drive this • Why we did it • Research by Unum in the US in the early 90’s indicated headline figures for cost of absence dealt mainly with direct costs only. Full costs were around twice the direct costs at around 10% of salary costs. We wanted to repeat this work in a UK rather than US context. • Time period • IES commissioned Aug 2000; First results presented Oct 2001

  4. Full report • Costing Sickness Absence in the UK IES Report 382 www.unumprovident.co.uk www.employment-studies.co.uk

  5. The Costs of Absence

  6. Why the concern over absence? • Lost productivity • Costs • Continuity of customer service • Employers’ duty of care • Fear of litigation • Government targets • Squeeze on ill-health retirement

  7. Ill-health retirements • Totals £1bn each year in the UK • Peaked at 40k public servants pa in 1990s • 39% of all Police retirements • 39% of all Local Govt. retirements • 22% of all Civil Service retirements • In teaching, each ill-health retirement costs over £35k

  8. How serious? • Average of 7.8 days lost per employee each year (CBI, 2001) • Public Sector 10.2 • Transport 9.4 • Construction 8.7 • IT 7.2 • Banking/finance 7.0 • Manufacturing 6.9 • Retail 5.8

  9. Published Cost Data • CBI/Work Foundation £10-12bn • Civil Service £404m • Police £210m • Prison Service £56m CBI estimate annual cost of £485.60 per employee

  10. Few Cost Absence - why? • Too time-consuming 35% • No computerised data 29% • No accurate records 26% • No absence problem 23% • Absence is a problem, but.. 15%

  11. Problems • Aggregate data only • No variation by staff group, sector etc. • Primary focus is on direct costs • Little account taken of indirect costs and management costs • No differentiation by duration of absence

  12. Background to UNUM study Context of study: Increasing concern among employers • Growth in long-term illness Aims of study: Identify total costs • Explain variability in costs Methods: Case studies • Analysis of absence data

  13. The nine case studies Retail store 3 Insurance company 1 Financial services 1 Public sector 2 Law firm 1 Retail group 1 Total 9

  14. Costs by employee group Absence as % of salary bill: Low: Managers Medium: Professional/Technical High: Sales/Manual Variable: Admin/clerical

  15. Absence costs per employee Medium retail store £465 Retail group £497 Regulatory body £809 Law firm £837 Small retail store £861 Insurance company £991 Large retail store £1,268 Financial services co. £1,677 Local authority £2,261

  16. Absence costs as % salary bill Law firm 1.8% Regulatory body 2.2% Insurance company 4.7% Retail group 6.5% Medium retail store 6.8% Financial services co. 7.8% Local authority 8.2% Small retail store 11.2% Large retail store 16.4%

  17. Why do costs vary? • Proportion of part-timers • Type of cover organised • Balance between short & long-term • Occupational mix • Age profile • Adherence to absence policies

  18. Long-term absence • Stands out as being poorly managed compared with short-term absence • early intervention • rehabilitation • Concern among line managers • Accounts for between 30% and 75% of total absence costs • Scope for cost reduction

  19. Full costs formula Direct Costs = 60% Indirect Costs = 20% Absence Management Costs = 20%

  20. Summary • Existing data on costs inadequate • Costs range from £465 to £2,300 • Up to 16% of annual paybill • UNUM figures frequently 300% higher than in-company estimates • Costs of poorly managed long-term absence is highest (up to 70% of total) • Direct costs only 60% of total costs

  21. CaseStudy

  22. Case Study • Male aged 21 • Employed as a clerk in a warehouse • Salary of £20,233 • He is absent from work suffering from depression

  23. Case Study • A gradual realisation that the most likely diagnosis is schizophrenia. • This is likely to be a long standing problem with a poor prognosis of a return to work. • Benefit at an initial level of £6,600 is insured for over 43 years.

  24. Questions ???

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