HRO Can Help Stem Absence Management Cost Hits – But There’s More

A recent CyberShift survey found that one third of the 1,088 respondents cited absence management as a continuing top priority. Yet 53 percent of the survey participants stated they did not have an automated system in place for absence, leave, vacation and FMLA tracking. This is a pretty scary statistic, especially when, per CyberShift, unscheduled absenteeism can cost businesses more than $760,000 per year in direct payroll costs alone.

At the same time, forward-thinking buy-side companies over the past couple of years have awarded absence management contracts to HRO providers, and the vendors are beefing up their absence management offerings. Let’s take a look.

Absence Management Contracts

• MidlandHR was awarded 10 contracts in the last two years for its iTrent HR and payroll software, including its absence management modules, by the University of Exeter, Capel Manor College, Oxford City Council, NetworkersMSB, Pentagon Investments, Preston College, Which? (yes, this is an actual company name), Manchester Fire and Rescue, Kent County Council and Farnborough College
• Wipro implemented Oracle’s PeopleSoft Enterprise HCM 9.0 for Jammu & Kashmir Bank in India. Modules implemented include absence management and approval workflow
• NorthgateArinso won a five-year contract with Hastings College for its ResourceLink HR platform, which supports absence management
• Convergys entered into a five-year contract renewal for multi-process HRO services with a leading business services company; components of the contract include absence management and leave administration
• Hewitt was awarded several unnamed contracts that include absence management
• Raet won a 10-year contract with OSG for its online HR portal, which includes absence management

Providers’ Enhanced Absence Management Offerings

Just a couple of weeks ago, Capita acquired FirstAssist Services Holdings Ltd. to strengthen its capabilities in health and workforce management, including absence management. In January, Hewitt added participant advocacy services to its absence management offering. In August, Ceridian added Presagia’s employee leave management software to support its leave management services. And Xchanging announced an alliance with absence management specialist FirstCare through which the two parties will jointly go to market with FirstCare’s absence management and occupational health pre-employment screening services and Xchanging’s portfolio of HRO services.  

Here’s my take. Leveraging software and services for absence management tracking is a great step in the right direction when it comes to stemming costs. But equally, if not more, important is drilling down into the why’s of non-authorized and non-sick absences. This maps to blogs I’ve written over the past year that focus on rampant employee dissatisfaction. Unhappy employees are more inclined to call in sick simply because they don’t want to go to their jobs. Get to the heart of employee dissatisfaction, fix what is truly broken across the enterprise, and absenteeism will decrease. Strong leadership and performance management training is invaluable in helping determine the root of employee discontent. Corporations lacking internal training programs of this type can leverage offerings from both full-scope and pure-play learning services HRO providers.

Gary Bragar, Lead HRO Analyst, NelsonHall

The Jigsaw Puzzle of Absence Management

Absence may make the heart grow fonder, but it causes employers angina. Companies are, of course, used to dealing with a certain amount of absence, both planned and unplanned…it is part of the cost of doing business. But the triple whammy of current economic pressures, leaner than ever staffs and unplanned absences, combined with planned absences, can cause a disproportionate impact on the total cost of labor.

In the just released 2009 Cybershift Trendline Survey of 1,200 American Payroll Association members, 76 percent of respondents estimated that up to 10 percent of their organizations’ absences were unauthorized. Add in the planned absences for vacations, the medical cost of absences and leaves due to illness and the cost of covering for those absences, e.g., overtime or use of temporary workers, and it adds up to real money. And we have not even estimated the impact on productivity or customer satisfaction.

Managing absence is a complex topic with many facets, some of which change depending on the characteristics of the industry and workforce, like one of those jigsaw puzzles with no clear, sharp edges. To isolate the puzzle patterns, the first step is to know the actual impact as soon as possible so issues can be addressed. The second is to apply absence and leave policies in a fair and consistent manner to balance employee care, regulatory compliance and the impact on productivity and cost. The third step is to proactively work to lower the total cost of absence.

As the Cybershift survey indicates, while many organizations are now using commercial time and attendance applications, others are still using older methods, including manual spreadsheets. Modern time and attendance systems are used to ensure correct and timely payroll. When a time reporting system is consistently used and time is properly coded, you also have a cornerstone piece of the absence management puzzle in place. 

The second piece is leave administration. There are an increasing number of tools and services available in this newly hot area, but many are limited to automating the process and processing the transactions. Important support to be sure, as this is a compliance area that can lead to grievances, lawsuits, audit problems and fines. And with regulations changing and varying from state to state and country to country, strong tools and HRO provider expertise will help organizations meet compliance requirements.

As noted above, the third major piece of the puzzle is proactively managing the total cost of absence. That role today largely falls to the company’s own managers and HR team. I think there is an opportunity here that lends itself to the world of multi-process HRO. The right set of integrated services, analytics capabilities and subject matter expertise to manage the total cost of absence could represent a new service offering that directly impacts the bottom line – a new piece of the absence management puzzle well worth figuring out.

Linda Merritt, Research Director, HRO, NelsonHall