Impact of employee sickness on company costs and productivity

Sickness 

Sickness absenteeism is largely detrimental to business processes in several ways. It is becoming increasingly relevant in recent time to be absent from work beside the “regular” winter flus or colds. Absences due to stress and mental health problems related to work are known to be a major determinant of sickness absenteeism (Grinza, E. and Rycx, F., 2018). Companies pay little to no attention to such, and those that do, do so for senior to upper white-collar roles mostly, neglecting the blue-collar ones. Even though the nature of the sickness is relevant and can be a subject of analysis on its own, this blog will not focus on why, but rather on the sickness as a general term and its impact on company costs and productivity, among others.  

We can highlight 5 key pillars that are negatively affected with high levels of employee sickness rates in organizations. These are: cost, productivity loss, quality loss, risk of customer dissatisfaction, and loss of team motivation.  

Cost  

A type of cost that arises is additional personnel cost which is due to adding temporary workers to the otherwise fixed pool of own employees. Another type of cost is additional personnel cost generated by the over hours of the pool. Companies hiring flex workers enjoy the “benefit” of having no cost in case flex worker is sick, then they simply miss out on a human resource to perform the actual work. Those firms hiring own employees are not that lucky, since each sick employee generates loss, alongside being a missed human resource. Missing resources mean less output which leads us to productivity loss. 

Productivity loss 

Productivity growth is a well-known key determinant of sustainable business growth (Grinza, E. and Rycx, F., 2018). Apart from negatively impacting the company’s wage bill, employee sickness also negatively impacts productivity. According to the same source, 1 percentage point in the rate of sickness absenteeism entails a productivity loss of 0.24%. Temporary workers, even more if they are new to the company, are keen to make more mistakes in the process, so only logical proposition would be to have the stable set of people present for a long time. This is an especially critical point if absent workers have high levels of firm/task-specific knowledge, which makes it difficult to temporarily replace (Pauly et al., 2002). Most of the employees working during the over hours are less productive than during regular working hours, increasing the chances of being less focused, thus creating risk for mistakes. Productivity loss leaves its mark on lower sales turnover, leading to dissatisfied end customer, potentially losing the business.  

Quality loss 

In case of quality loss, lower customer service rate can be expected. Risk of customer dissatisfaction occurs due to potential delays towards the customer in case of not having enough resources or low productivity. The consequences can have an impact greater than “only” lower sales turnover due to lack of resources which do not fulfil requests of the customer, the image of the company as a reliable partner can also be shattered. Coming back to people factor – companies should invest in the health and well-being of their blue-collar workers to preserve quality standards.  

Loss of team motivation 

Even though it may not seem plausible at first, sick employees will influence the well-being of the whole team. Psychologically, people associate themselves with the group they are a member of, and theories of similarities in the social psychology stipulate that group will have a major impact on an individual’s actions, behaviour and thoughts, even when the individual would not act in the same way on its own. E.g. an individual may be an excellent performer when put on the work floor when he/she needs to work individually. When we put the same person to a group of less motivated and eager performers, he/she will also start losing his/her grip. Vice versa, if a poorer performer is added into the better performing team, he/she should also start performing better (given that their intellignce, skills, capabilities, and other relevant traits are relatively in line with those of the rest of the team).  

What actions should a company do to reduce the sickness rates and keep the productivity, quality and motivation high? Is a yearly gym pass enough to keep the people healthy and present? What about how people actually feel in their workplace, how to really find that out? Read about the solutions in the whitepaper downloadable below. 

Sources: 

Grinza, E. and Rycx, F. (2018) The Impact of Sickness Absenteeism on Productivity: New Evidence from Belgian Matched Panel Data [Preprint]. 

Pauly, M. V., Nicholson, S., Xu, J., Polsky, D., Danzon, P. M. (2002) A General Model of the Impact of Absenteeism on Employers and Employees. Health Economics 11 (3), 221 231.  

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