UNDERSTANDING AND MANAGING SICKNESS ABSENCE Terry Coulthard and Peter Dewis PD\ARL\Healthcare 2002

Introduction Background Results of IES/UP study Case study Discussion

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

Full report –Costing Sickness Absence in the UK IES Report

The Costs of Absence

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

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

How serious? Average of 7.8 days lost per employee each year (CBI, 2001) –Public Sector10.2 –Transport9.4 –Construction8.7 –IT7.2 –Banking/finance7.0 –Manufacturing6.9 –Retail5.8

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

Few Cost Absence - why? Too time-consuming35% No computerised data29% No accurate records26% No absence problem23% Absence is a problem, but..15%

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

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

The nine case studies Retail store 3 Insurance company1 Financial services1 Public sector2 Law firm1 Retail group 1 Total9

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

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

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 store11.2% Large retail store16.4%

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

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

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

Case Study

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

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.

Questions ???