Absences, resignations on the rise

Costs to employers also increasing, but is HR crunching the numbers?
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 11/22/2011

While Canada’s employment rate may be rising, employee turnover is also on the rise as absenteeism and resignation rates grow and businesses struggle to retain workers, according to the HR Metrics Service. The annual cost of absences has increased by $300 per person and the median cost of resignations per employer has shot up 60 per cent.

“The rising absenteeism brings a significant increase in additional organizational costs through lost productivity, additional labour costs for overtime and increased HR/managerial workload to track and deal with attendance,” said an update from the service, a collaborative venture by the British Columbia Human Resources Management Association (BC HRMA), the Human Resource Management Association of Manitoba (HRMAM) and the Human Resources Professionals Association (HRPA).

“It also indicates a likely future increase in health-care costs, as a percentage of all absences will become chronic health issues.”

In 2009, workers missed an average of 1.4 days in the first quarter; 1.2 in the second; one in the third; and 1.5 in the fourth — adding up to about five days or a cost of $1,500 per employee, said Ian Cook, director of the HR Metrics Service and director of research and learning at BC HRMA in Vancouver.

For 2010, the days add up to six, making the cost $1,800. In 2011, each person has effectively been away for 1.9 days in the first quarter and 1.5 days in the second quarter.

“So you’re paying for 0.4 days more per person (than in 2009),” he said, and when that’s calculated for a 500-employee organization on an annual basis, “It’s a whack of cash.”

Cost of time not worked per year for a workforce of 500 full-time equivalent (FTE or measure of hours worked) was almost $1 million in 2010. In 2011, that cost is expected to increase seven per cent.

However, most employers are not aware of the dollar costs of absenteeism, such as the impact on benefit plans or productivity, said Anne Howard of Anne Howard Human Resource Consulting in Calgary.

“I don’t see those kinds of stats in organizations.”

When you ask employers about their short-term or long-term disability costs or workers’ compensation costs, most don’t have a policy or perspective, said Mike Cuma, a partner at Legacy Bowes Group in Winnipeg.

“Employers are blithely unaware of those things,” he said. “Organizations are not aware of the direct costs nor the indirect costs of those things.”

And when it comes to absenteeism, a lack of employee engagement is a big part of it, he said.

“A lot of employees are just checking out or have checked out — they’ve either in some way given up or aren’t putting forth that sense of commitment to the organization.”

A permitted culture of absenteeism is another issue, said Cuma, as many supervisors are not equipped to deal with the issue so they ignore it until there’s a real crisis.

The difficult economy is also having an effect, he said, as people’s financial situations have depressed rapidly and there are issues around family care or child care.

“Intrinsically, we’re asking a lot more of the existing people in our workplaces and that, in itself, is creating pressures and stresses on people. We’re seeing a high frequency of people being absent from work for stress leave and mental type of challenges, more so than we’ve ever seen.”

People are exhausted so they need breaks, said Howard.

“People are under a lot of pressure to produce a lot. People are leaving, their jobs are disappearing, there’s bad news everywhere, the global economy is bad and, on top of that, people have a lot of things to do every day and they’re tired, and the result is they get run down, they get sick more easily, their children get sick.”

Some of the absences are also linked to employees taking a casual day to look for new jobs, said Cook.

“As absenteeism numbers go up, then the resignations go up, then people are being successful in those job shifts.”

There has been a sharp increase in the rate of resignations since 2009 and this is expected to grow, said Cook. In 2009, the median cost of resignations per organization for a workforce of 500 was $1.2 million. In 2010, the cost increased by 60 per cent to $1.9 million.

So in looking at the four quarters of 2009, the turnover percentage for the year is 4.3 per cent, he said, and that rises to 6.6 per cent in 2010. For 2011, that elevated level of movement is going to be maintained, he said.

“Organizations have been running desperately lean for 18 months to two years and you can only starve an organization of talent for (so) long before you actually erode the overall capability,” said Cook.

“(Employers) will start to take the lid off on hiring and, therefore, more vacancies will come around. Therefore, all those people who are stressed and burned out (will think), ‘The grass is greener.’”

If an employer has had to do forced layoffs, it breaks trust with a lot of people who will then look to move when the opportunity arises, he said.

“All of the factors are suggesting increased vacancies, increased hiring, a real appetite for change, therefore … an elevated churn within the employee group.”

Despite the challenges in the economy, there’s an active, hidden job market, said Cuma. And many people are not prepared to put up with a lot of nonsense.

“Employees, by and large, are very quick to say, ‘Hey, if that’s the way this company is, I’m not going to be part of this.’ People are less willing to suffer poor management or poor supervisory practices.”

Between the second quarter of 2008 through far into 2009, people didn’t leave their jobs even if they were unhappy because the economy was frightening, said Howard.

“That period caused a backlog of what would have been normal turnover... when people started to recognize that perhaps this unstable world we’re now living in was going to be the new normal.”

While 2009 saw employers too shocked to do anything as a business, by 2010 they had decided this was the new normal and were looking to grow, said Cook.

“So the middle of 2010 starts to see organizations realigning their strategies and, therefore, hiring to be able to fulfill those strategies.”

So while the economic activity may not be creating more jobs overall, the indicators are that resignations are going to increase, said Cook.

“Retention is still highly crucial because the volume of churn within the existing employee base is getting higher,” he said.

“So paying attention to the unemployment numbers is the wrong place to look — it’s vacancies, its resignations that are probably the key drivers and absence as a precursor to people’s intention to leave.”

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