Lee Coppack looks at the growing focus on absence management, and at how Tesco is tackling the issue

Dear Editor,

Unfortunately, I hurt my back over the weekend and I'm not going to be able to come to work today. Could you get someone else to write my article this month?

Yours sincerely,


Notes, or more probably phone calls, like this usually mean that other employees have to take on the work of their absent colleagues. At UK retailer Tesco, the issue has come to a head. As a result, the company is testing a new policy in 20 of its stores, with the aim of reducing the amount of unplanned, short-term absence.

In the UK, absences of up to seven days are self-certifying. In other words, the employee simply says: 'I'm too ill to come in'. Any longer off work and the person needs a doctor's note. The policy Tesco is trying out means that those who take part will no longer be paid for the first three days of an unplanned absence, even if an illness turns out to last longer. In compensation, however, they get an extra three days paid holiday, so in many cases the net effect will be neutral.

Although the story got some headlines - the shirker worker is a popular press image - Tesco's absence levels would only attract the interest of analysts if there were evidence that they were materially better or worse than the sector as a whole. Tesco has reported steadily increased profits, earnings per share and dividends for the last five years, and the stock has been outperforming the FTSE 100 for about 18 months. The retail sector as a whole has been more preoccupied with profit warnings, takeover talk and a row over the bonus to Sainsbury's ousted chairman.

Nevertheless, the 2004 European risk survey by insurance broker and risk specialist Marsh put loss of productivity due to absenteeism and staff turnover third among the top five risks that senior executives feel are not robustly managed.

In 2003, workplace absence in the UK increased for the first time in five years, according to the annual survey of 500 firms by the Confederation of British Industry (CBI) and AXA. One of the main reasons was an 8% rise in days lost in the service sector. Previously, the trend had been stable or slightly downward.

An in-depth study, How Employers Manage Absence, by the Institute of Employment Studies published in March 2004 highlighted two reasons for growing attention to employee absence:

- increased emphasis on employers' duty of care toward their employees
- highly competitive industries, such as supermarkets, seeking to optimise employees' productivity and to minimise disruption caused by absence.

How Employers Manage Absence publishes a case study of a food retailer, described as 'one of the leading grocery retailers in the UK.' Senior managers were concerned about the levels and patterns of absence among workers, but no data was available. Human resources staff who monitored absence levels and patterns were, however, 'convinced that unscheduled absences cause the most problems and have a rule of thumb that an average, short-term sickness absence level in excess of 3% causes operational problems.'

The risk manager's role

Absence management is usually the province of human resources, not the risk manager, but, according to John Humphrey, human capital risk specialist at Marsh, risk managers are getting involved in high-frequency absence, where the sheer volume of lost days can be catastrophic. Gary Marshall, risk manager of print and data group Polestar, says the risk manager should be involved in the high-frequency, high-severity absence management policy.

Either area could fall within the employer's duty of care and consequently be a potential liability issue.

There are also risk management implications if employees come to work when they are unwell or over tired. Peter Done, managing director of the employment law firm Peninsula, points out that the employer has a legal responsibility to ensure employees do not operate machinery or other equipment, if they are unfit to do so.

Daniel Naftalin, partner at law firm Mishcon de Reya, says: "You are effectively forcing people to go to work, and this could give rise to negligence claims as people make more mistakes when they are ill." He advises companies to investigate the reasons behind absence, so they are not exposed to claims of disability discrimination. The employer must not treat the disabled employee more unfavourably than able-bodied employees, and this implies that causes of absence are investigated.

One of the biggest problems is that few organisations really understand absence. Stephen Bevan and his colleagues from the Institute of Employment Studies struggled to get good data for How Employers Manage Absence. They remark: 'Trends in absence within organisations were difficult to explore accurately, as very little information was systematically collected and recorded. Sick and maternity leave were usually recorded for pay reasons and to ensure compliance with statutory obligations. However, these data were rarely being used to actively measure and monitor absence.'

Although Tesco's annual report for 2003 gives considerable information on its risk management policies, the company did not respond to questions about the extent to which it monitors absence, or whether the risk management function is involved. Their policy, said a spokesman, had been developed in response to feedback from staff, not as a result of management concerns.

The UK's Advisory, Conciliation and Arbitration Service (ACAS) says in an advisory booklet to employers that patterns of absence vary from organisation to organisation, but that research has identified a number of common features:

- young people tend to have more frequent, shorter periods of sickness than older people
- manual workers generally have higher levels of absence than office workers
- unauthorised absence is more common among new starters
- sick leave due to industrial accidents is also greater for new or inexperienced workers
- absence increases where there are high levels of overtime, or frequently rotating shift patterns
- absence tends to be greater in larger working groups.

Surveys also indicate that a substantial proportion of employees is prepared to call in sick when the illness is self-inflicted - a hangover for example - or because of non-work related stress or the need to catch up with personal chores. On the other hand, work-related stress, can itself result in physical and mental illness. The top three reasons given for short-term absence in nearly all organisations, says Humphrey, are muscular-skeletal, stress and infectious diseases.

An independent online survey of 2000 people carried out for Lloyds TSB and published in April 2004, reported that 31% admitted to having called in sick when tired or hung over, while 40% said they had done so to catch up with tasks at home.

Even for longer absences, Britain's doctors believe that four out of ten of the sick notes they are asked to sign - and there are 22m a year - are questionable or bogus, according to a survey by the research firm Dr Foster for Norwich Union. Doctors are particularly sceptical of claims for backache and workplace stress. However, only 7% of the 1,000 workers questioned said they would consider asking their GP to sign a bogus sick note.


Given the lack of data on absence, estimates of the cost of absence, and therefore the benefits of reducing it, are uncertain. The Chartered Institute of Personnel and Development puts the figure at £567 per employee per year. The CBI/AXA report estimates the wage and replacement costs of absent employees at £475 per person.

In How Employers Manage Absence, only two of the 13 organisations surveyed could place a financial cost on absence. However, Bevan and his colleagues identified the following factors:

- direct financial costs, such as salaries and other benefits paid to employees who are absent; overtime payments; costs of hiring temporary cover
- indirect costs, such as the time taken for a replacement to learn the new role and become productive; diminished services and product quality; loss of business and reputation
- the indirect cost of management and HR time
- the negative impact of absence on employee motivation where insufficient cover is provided, or where employees are seen to be abusing the system.

From this it is clear that, although short-term absence is the most disruptive, costs are more likely to be a serious issue where absence is extended.

The CBI/AXA survey found that long-term absence accounted for 5% of all cases, but for a third of time lost. The manufacturers' organisation EEF reported in April 2004 that one in three of its members say long-term sickness absence is on the rise, accounting for 80% of the total time lost from work.

Less than 10 years ago, it was clear from work done by the International Underwriting Association, that the UK lagged behind a number of European countries in rehabilitating injured workers and getting them back to work.

Pressure from the insurance industry, the risk management association AIRMIC and employers' bodies has since changed this, according to occupational therapist Craig Fletcher of consultants idRisk and Harrison Associates.

"Rehabilitation is a tiny part of the overall cost, but very cost effective for employers."

How Employers Manage Absence concluded that the ease and effectiveness with which absence was managed varied between employers. Those who managed absence well were also more likely to have a climate of trust, a positive outlook among managers and high levels of internal skill substitution.

The aim, says Humphrey, should be to "discourage the working ill as well as the absent well."

Lee Coppack is a risk management and insurance writer and analyst. She is also editor of Strategic Risk's sister publication, Catastrophe Risk Management.


In 2003, workplace absence in the UK increased for the first time in five years, according to the annual survey of 500 firms by the Confederation of British Industry (CBI) and AXA. One of the main reasons was an 8% rise in days lost in the service sector.

John Cridland, CBI deputy director-general, commented "As costs rose in 2003, many services firms were forced to slim down and conduct the same amount of work with fewer staff. This would have increased pressure on employees and possibly affected morale, leading to an increase in absence."

Among the findings were:

- total days lost rose to 176m (2202 - 166m) or 7.2 days per employee
- the total cost is estimated at £11.6bn for the salaries of absent individuals, the resulting overtime and temporary cover. This amounts to £475 per employee, a similar figure to 2002
- employers suspect that sickness is an excuse in 15% of all absence. The cost of extended weekends and 'sickies' is estimated at £1.75bn
- long term absence accounted for 5% of all absence cases but for a third of time lost
- manual workers have higher absence rates than non-manual, 8.7 days a year compared to 5.9
- larger organisations reported higher absence levels than smaller ones.

Firms employing over 5,000 averaged 10.2 days per employee, while companies with fewer than 50 staff averaged 4.2 days.