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Why finance leaders must pay attention to employee absence

28 January 2021 5 min read

finance people

As a finance leader, it‘s crucial to have complete visibility and control of business costs to meet strategic objectives. But are you aware of employee absence and its impact on business operations, and how closely it’s tied to its future success?

Employee absence is reported to cost the economy £18 billion per year and rising. That’s up to £550 per employee. But looking beyond that, employee absence is a minefield on both the global and domestic stages. As legal compliance, all types of absence must be managed appropriately. But what happens when it goes wrong? 

The case of CCOO vs Deutsche Bank SAE 

In May 2019, the Court of Justice of the European Union (CJEU) delivered a judgment in the case of CCOO v Deutsche Bank SAE. Under previous Spanish law, employers only had to keep a record of overtime hours worked each day by each worker, rather than all the hours they actually worked. This legislation was since changed, and the evidence given was that nearly 54% of all overtime was not recorded in the business.

All companies in Spain are now required to have all their workers check in and out daily so there is a record of the exact working hours. Failure to comply and the employer can be fined up to €6,250. Also declaring that all member states of CJEU must require employers to implement an objective, reliable and accessible system enabling the duration of time worked each day by each worker.

Here’s why employee absence needs your attention…

Absence is complex 

How absence is tracked and recorded can vary considerably between companies, and the bigger those companies are the more complex it can get. 

Some businesses give full control to HR teams to manage absence from start to finish. Meanwhile, others put the responsibility on managers to work closely with payroll teams that together rely heavily on error-prone spreadsheets and paper forms. And this reactive approach to absence is where it can go wrong.

Let’s take statutory sick pay as an example. Rules vary across different countries and regions and it becomes unmanageable with spreadsheets and paperwork. The process becomes slow and the process isn’t integrated across the different areas of the business for effective communication, and ease of use. This often leads to sick days being missed or not processed correctly as per the rules within their country or region. This lack of control and communication will ultimately cost your business money.

The same applies to annual leave entitlement and making sure employees have the correct number of days in line with local compliance. This becomes more complex with your company operating within different regions of the world and manual methods become severely limited.

From the perspective of financial leaders like yourself, processes like this managed in an unproductive and disconnected way will lead to inaccuracies between your systems like payroll. If absences aren’t carefully managed; how confident are you that employees are being paid correctly? This becomes a bigger compliance issue if your company operates in multiple regions of the world. It becomes an impossible task for spreadsheets, paper forms, and even HR tech that can’t keep up with the layers of complexity.

Absence is directly linked to business operations 

As a leader in your business, it’s important to be aware that employees not taking holidays will severely impact your business and its overall performance to meet strategic goals. With legislation related to unused holidays and carryoversit’s more important than ever to make sure absence is tracked correctly. On top of that, cases of employee stress and burnout are spreading across businesses faster than ever.

According to the CIPD, stress and mental ill-health are two of the biggest causes of unplanned absence. Not seeing the connection between absence and stress will inevitably lead to diminishing morale which will see a rise in unplanned absences, and losing your company’s best talent.

Exceptional employees are very difficult to replace. It’s been reported that the cost of replacing an employee can cost up to £30,000. What’s more, employees that eventually sign-off with long-term sickness will become more difficult to retain and manage which be a huge cost to the business in time.

Change is in your control

So, what’s in your control as a finance leader? Investing in better technology that will improve efficiencies and help your business hit strategic objectives. 

Smart, cloud-based absence management software will seamlessly connect your business together to drive more value from your employees and its operations. The technology removes the inaccuracies that complex domestic and international compliance rules will bring. This is a challenge paper and spreadsheets that rely on manually entered rules and formulae will struggle to overcome. 

Better management of absence will not only deliver the immediate financial benefits but will also avoid costly impacts in the future such as employee turnover which is critical for business growth.

Free report: Discover the risks of employee absence on your company & benchmark against your industry leaders.

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Harry Customer Success Manager at edays
January 28, 2021

Harry is Head of Customer Success here at edays, helping organisations to get the very best out of their edays system. His experience in SaaS and HR brings valuable insight into how organisations can better manage their people, processes and productivity.