Cost of Absence

Table of contents:

• What Is the Cost of Absence?

• How Is the Cost Calculated?

• Why Absence Is More Than a Financial Problem

• How to Reduce the Cost of Absence

• How GoodShape Helps Reduce Absence Costs
  
  

Cost of Absence

Employee absence is an inevitable part of running a business, but when left unmanaged or poorly understood, it can have a significant impact on productivity, morale, and the bottom line. The cost of absence goes beyond sick pay – it includes direct and indirect costs that many organisations fail to quantify.

In this article, we explore what contributes to the cost of absence, how to calculate it, and what employers can do to reduce both its financial and cultural impact.

What Is the Cost of Absence?

The cost of absence refers to the total financial burden an organisation faces when employees are not at work due to illness, injury, stress, or personal reasons. These costs include:

• Direct costs such as statutory or occupational sick pay, temporary cover, and overtime payments.
• Indirect costs including lost productivity, reduced customer service, missed deadlines, disruption to teams, and increased pressure on colleagues.
• Hidden costs like employee disengagement, poor morale, compliance risk, and higher attrition.

According to the CIPD, UK employers lost an average of 7.8 working days per employee per year to absence in 2023, costing businesses £818 per employee annually in direct costs alone. (Source: CIPD Health and Wellbeing at Work 2023)

How Is the Cost Calculated?

To estimate the cost of absence, employers should consider:

• Absence rate: total days lost per employee per year.
• Average salary costs per day.
• Cover costs: agency fees, overtime, or reallocation of work.
• Productivity impact: time lost to disrupted workflows or team rescheduling.
• Management time spent handling absence, return-to-work processes, and record-keeping.

An example formula might look like:

Total Cost = (Total Days Lost) x (Average Daily Salary + Cover Costs + Productivity Impact)

Why Absence Is More Than a Financial Problem

Absence is not just a cost issue – it’s a cultural and operational one. Unplanned or frequent absence can:

• Erode team morale when others are picking up the slack
• Create inconsistency in service delivery or project continuity
• Lead to presenteeism, where employees attend work unwell, reducing performance and prolonging recovery
• Signal deeper wellbeing or organisational culture issues that need addressing

In highly regulated sectors, such as healthcare or finance, unmanaged absence may even increase compliance risks if safety-critical or oversight roles go unfilled.

How to Reduce the Cost of Absence

1. Track Absence Accurately: Use digital tools like GoodShape to capture absence data in real time. Visibility is key to identifying patterns and hotspots.
2. Train Line Managers: Equip managers to spot early signs of health or wellbeing issues, hold supportive conversations, and ensure return-to-work interviews are meaningful.
3. Invest in Employee Wellbeing: From mental health support to flexible working, proactive wellbeing policies reduce avoidable absence.
4. Standardise Processes: Consistent policies around fit notes, triggers, and phased returns build fairness and reduce disputes.
5. Analyse Trends: Use absence data to uncover root causes – is stress higher in certain teams? Are manual workers experiencing musculoskeletal issues?

How GoodShape Helps Reduce Absence Costs

GoodShape enables organisations to reduce the cost of absence by:

• Providing a centralised, real-time view of all absence types
• Automatically flagging trigger points or repeat patterns
• Supporting case management and return-to-work compliance
• Offering data-driven insights to improve wellbeing strategy
• Integrating with EAPs, OH providers, and workforce planning tools
  
  

The true cost of absence often goes underestimated. It’s not just about days lost or pounds paid out, it’s about disruption, morale, and the long-term sustainability of your workforce. Organisations that take a proactive, data-driven approach can dramatically reduce absence-related costs while improving the support they offer to employees.

GoodShape has helped over 200 large organisations reduce absence, improve wellbeing, and manage risk. Book a demo to learn how we can help your organisation.