HRM textbook

428 PART 4 COMPENSATION
COST-REDUCTION TACTICS Employers use several tactics to reduce excessive
sick leave absence. Some repurchase unused sick leave at the end of the year by
paying their employees a sum for each sick leave day not used. The problem is that
legitimately sick employees may come to work. Others have held monthly lotteries
in which only employees with perfect monthly attendance are eligible for a cash
prize. At Marriott, employees can trade the value of some sick days for other benefits.
Others aggressively investigate all absences, for instance, by calling the absent
employees at their homes. 17
Many employers use pooled paid leave plans (or banks ). 18 These plans lump
together sick leave, vacation, and personal days into a single leave pool. For example,
one hospital previously granted new employees 25 days off per year (10 vacation days,
3 personal days, and 12 sick days). Employees used, on average, 5 of those 12 sick days
(as well as all vacations and personal days). 19 The pooled paid leave plan allowed new
employees to accrue 18 days to use as they saw fit. ( Catastrophic leaves short-term
illnesses causing absences for more than 5 consecutive workdays, and special absences
like bereavement leave were handled separately.) The pooled plan reduced absences.
Most firms don t include federal holidays in their paid time off banks. 20
Evidence-Based HR: Tracking Sick Leave
For many employers, sick leave is out of control simply because they don t measure it.
In one survey, only 57% of employers formally tracked sick days for their exempt
employees and only 46% tracked personal days. 21 Three-fourths of the employers
could not even provide an estimate of what their sick pay was costing as a percentage
of payrolls. Therefore, before taking other cost control steps the employer should have
a system in place for monitoring sick leaves and for measuring their financial impact.
The accompanying HR as a Profit Center feature expands on this.
The same applies to controlling health care costs. Some estimate that 5% to 15%
of medical plans enrollees may include ineligible dependents such as ex-spouses.
Periodically auditing dependents can thus translate into significant health care
cost savings. 22
HR AS A PROFIT CENTER
Cutting Absences at the Driver and Vehicle Licensing Agency
Government agencies are as (if not more) susceptible to excessive sick leave claims
as are private companies. So when she came in as a director of the United Kingdom s
Driver and Vehicle Licensing Agency, part of the Department of Transport,
Judith Whitaker saw that steps were needed to address the agency s sickness
absence rate. 23 The rate had peaked at 14 days out per employee in 2005, at a cost
of about $20 million per year (£10.3 million). The rate was down to 12.5 days
by 2008, but was still too high.
The new director organized a multi-faceted human resource management
initiative to address the sick leave absence problem. 24 The agency set a goal
of reducing absences by 30% by 2010. Agency directors received absencereduction
goals, and their progress was tracked. The agency introduced new
policies and procedures dealing with special leave, rehabilitation support, and
keeping in touch with absentees. They introduced new policies to make it easier
for employees to swap work shifts, and introduced a guaranteed leave day
policy. They also introduced new smoking cessation classes and a weight
management program.
These and similar actions were apparently very successful. The average
annual sickness absence rate in 2010 was down to 7.5 days per employee.
Improved attendance probably contributed to a 7% productivity increase
in 2009 2010. This translates into a reduction in the agency s costs of about
$48 million dollars (£24.4 million).