Absenteeism is the term generally used to refer to unscheduled employee absences from the workplace. Many causes of absenteeism are legitimate—personal illness or family issues, for example—but absenteeism can also be traced to factors such as a poor work environment or workers who lack commitment to their jobs. If such absences become excessive, they can adversely impact the operations and, ultimately, the profitability of a business.


Unscheduled absences are costly to business. According to the U.S. Department of Labor, companies lose approximately 2.8 million workdays a year because of employee injuries and illnesses. The inability to plan for these unexpected absences means that companies hire last minute temporary workers, or pay overtime to their regular workers, to cover labor shortfalls; they may also maintain a higher staffing level regularly in anticipation of absences. According to Matt Lewis, in an article entitled "Sickened by the Cost of Absenteeism," which appeared in Workforce in the fall of 2003, "Three to 6 percent of any given workforce is absent every day due to unscheduled issues or disability claims '¦ To compensate, most companies continually overstaff by 10 to 20 percent to mask lost productivity. That's a colossal cost."

Small businesses are, of course, not immune to such "expenses." There are obvious costs associated with an absent employee, including consequences difficult to measure. The most obvious cost is in the area of sick leave benefits—provided that the business offers such benefits—but there are significant hidden costs as well. The SOHO Guidebook cites the following as notable hidden cost factors associated with absenteeism:

  • Lost productivity of the absent employee
  • Overtime for other employees to fill in
  • Decreased overall productivity of those employees
  • Costs incurred to secure temporary help
  • Possible loss of business or dissatisfied customers
  • Problems with employee morale

The costs associated with absenteeism can be controlled. While scheduled time off for vacations and illnesses is an inevitable cost of doing business, managing things in such a way as to discourage excessive absenteeism is well worth the effort.


Many small business owners do not establish absenteeism policies for their companies. Some owners have only a few employees, and do not feel that it is worth the trouble. Others operate businesses in which "sick pay" is not provided to employees. Workers in such firms thus have a significant incentive to show up for work; if they do not, their paycheck suffers. And others simply feel that absenteeism is not a significant problem; they see no need to institute new policies or make any changes to the few existing rules that might already be in place.

But many small business consultants counsel entrepreneurs and business owners to consider establishing formal written policies that mesh with state and federal laws. Written policies can give employers added legal protection from employees who have been fired or disciplined for excessive absenteeism provided that those policies explicitly state the allowable number of absences, the consequences of excessive absenteeism, and other relevant aspects of the policy. Moreover, noted The SOHO Guidebook, "a formal, detailed policy that addresses absences, tardiness, failure to call in, and leaving early can serve to prevent misconceptions about acceptable behavior, inconsistent discipline, complaints of favoritism, morale problems, and charges of illegal discrimination. General statements that excessive absenteeism will be a cause for discipline may be insufficient and may lead to problems."

Changes in company culture and policy have been cited as effective in reducing absenteeism. The use of flexible schedules, whenever possible, is one way to offer employees a means of managing their own personal time needs and thus reducing unscheduled absences. Many small businesses that have introduced flextime, compressed work weeks, job sharing, and telecommuting options to their workforce have seen absenteeism fall significantly; these policies provide employees with much greater leeway to strike a balance between office and home that works for them (and the employer).


Most employees are conscientious workers with good attendance records (or even if they are forced to miss significant amounts of work, the reasons are legitimate). However, it is estimated that as many as three of hundred workers are likely to exploit the system by taking more than the allotted sick time or more days than actually necessary.

To address absenteeism, then, many small businesses that employ workers have established one of two absenteeism policies. The first is a traditional absenteeism policy that distinguishes between excused and unexcused absences. Under such policies, employees are provided with a set number of sick days (also sometimes called "personal" days in recognition that employees occasionally need to take time off to attend to personal/family matters) and a set number of vacation days. Workers who are absent from work after exhausting their sick days are required to use vacation days under this system. Absences that take place after both sick and vacation days have been exhausted are subject to disciplinary action. The second policy alternative, commonly known as a "no-fault" system, permits each employee a specified number of absences annually (either days or "occurrences," in which multiple days of continuous absence are counted as a single occurrence); this policy does not consider the reason for the employee's absence. As with traditional absence policies, once the employee's days have been used up, he or she is subject to disciplinary action.

"Use It or Lose It"

Some companies do not allow employees to carry sick days over from year to year. The benefits and disadvantages of this policy continue to be debated in businesses across the country. Some analysts contend that most employees do not require large numbers of sick days and that systems that allow carryovers are more likely to be abused by poor employees than appropriately utilized by good employees, who, if struck down by a long-term illness, often have disability alternatives.

A friendly feature that can be added onto a "use it or lose it" sick day policy is the option of donating unused earned days to a leave bank for colleagues suffering from catastrophic illnesses. Although this may not be an incentive to all employees to conserve sick days, it does offer dedicated employees a means of putting what they may consider legitimately earned hours to a positive use.


Absenteeism policies are useless if the business does not also implement and maintain an effective system for tracking employee attendance. Some companies are able to track absenteeism through existing payroll systems, but for those who do not have this option, they need to make certain that they put together a system that can: 1) keep an accurate count of individual employee absences; 2) tabulate company wide absenteeism totals; 3) calculate the financial impact that these absences have on the business; 4) detect periods when absences are particularly high; and 5) differentiate between various types of absences.


Allerton, Haidee E. "How To." Training and Development, August 2000.

Anderson, Tom "Employers Lax on Absence Management." Employee Benefit News, June 15, 2005.

Ceniceros, Roberto. "Written Policies Reduce Risk in Firing Workers Comp Abusers." Business Insurance. April 21, 1997.

"Don't Let Unscheduled Absences Wipe You Out." Workforce, June 2000.

Gale, Sarah Fister. "Sickened by the Cost of Absenteeism." Workforce, September 2003.

Hunt, David. "'There's a Bit of Flu Doing the Rounds, Boss," Employee Benefits, April 2000.

"Link Absenteeism and Benefits—And Help Cut Costs," HR Focus, April 2000.

The SOHO Guidebook. CCH Incorporated, 1997.