SMEs: A tale of good & bad absence management

Written by
Chris Morgan

21 Dec 2016

21 Dec 2016 • by Chris Morgan

A third of SMEs do not have an adequate system for managing absence well (according to our research in 2015). The difference between managing absence well and managing it badly can have a significant impact on SME businesses, their insurance and most importantly, their people.

This tale demonstrates just how important it is for SME managers to stay on top of absence and how it can benefit them.

Absent absence management

Cathy owns three cake shops and employs 28 people. She doesn’t record absence in a spreadsheet or use an online absence management system and instead relies on paper holiday requests and return to work forms. Organising and managing this is a drain on her time and resources.

As she has to shuffle paperwork across the three locations, it’s easy for her to misplace forms and forget to record holiday, resulting in staff shortages and poor customer service.

As Cathy hasn’t been recording and monitoring absence, she hasn’t noticed that a baker in one of the stores, Sally, has been taking sick days at regular intervals, often 2-3 days at a time every three months. Not only is this absence having a financial impact on her business but when she spots this, she is unable to confidently approach Sally to question her absence as she doesn’t have accurate historical data to back her up.

What’s more, she hasn’t realised that Jack, a cashier, has now been absent for three weeks after initially phoning in sick. This means that Cathy hasn’t been able to support Jack and direct him towards services that could help him to get better quicker and return to work. As a result, he is feeling unsupported and instead of getting better, is struggling with the idea of returning to work.

For those at work, absent colleagues and poorly coordinated holiday bookings has placed more pressure on the team, which is negatively impacting productivity. This leads to low morale as the team feel overworked and unsupported and some even consider leaving.

Cost of overlooking absence

After three months, Jack is still unwell and hasn’t returned to work. It turns out he has a back problem that has been left untreated, which is not surprising given the pressures on his GP and limited resources of the NHS, and this has now got worse and means he is likely to be off for longer.

Cathy has to pay her people Statuary Sick Pay (SSP) of £88.45 per week for the first 28 weeks of absence. Without insurance, she is having to pay these costs in addition to overtime for some of her team to cover the workload.

She also has no access to rehabilitation services, but will be able to access a maximum of £500 from the Government’s Fit for Work service. Although this will allow Cathy to point Jack towards healthcare services after four weeks of absence, it isn’t a long term solution.

Cathy must hope that Jack recovers soon, especially as she doesn’t have any long term sick insurance in place either, so after SSP has run out (28 weeks) she will face a moral dilemma. Does she leave Jack on meagre state benefits, or does she continue to pay him?

So, what happens if Cathy manages absence well?

If Cathy was to use absence management software, the time taken to record and manage absence would be reduced and she would have consistent and well documented information regarding absences of various types.

She would be able to recognise recurring absences and find out the cause behind them. Cathy would then be able to provide Sally with tailored support or act on illegitimate absence with data to back her up, placing her in a stronger legal position.

Cathy would also be immediately alerted to Jack’s absence and the given reason. As she also has insurance in place, her insurers are then able to intervene quickly and provide Jack with physiotherapy to help him back to work sooner. Even if she didn’t have insurance, she would still be able react more quickly to the absence and better support Jack’s return to work.

As Cathy has been supporting Jack from the outset, her other employees feel valued in their role and comforted that support will be given if they were to fall ill. Cathy is also able to see all absence and agreed holiday in an online calendar, and is therefore able to organise cover and keep her business ticking over as normal.

This gives her people confidence that their holiday requests are being actively managed and coordinated and, as a result,  they don’t need to worry about covering for others at the last minute.

Protecting the purse

Jack is able to return to work after only five weeks of absence and as a result, Sally only has to pay SSP until his return, avoiding any further long term costs such as recruiting and training temporary staff to cover for Jack.

It also means she doesn’t need to make a claim on her long term sick pay insurance, which helps keep next year’s premium affordable.

Its not as expensive as you think

The typical cost for a standalone absence management system is approximately £30-£40 per employee per year, which would cost Cathy roughly £1,000 annually if she chose to buy it separately.

Whereas, investing in disability insurance that includes absence management software, like our Sick Pay Complete product at Ellipse, could cost just over £90 per employee per year for a fairly typical level of cover[1].

So is it really too much effort or cost to start thinking about managing absence well?

Knowing where your people are, and how well they are through managing absence, not only takes care of your people, but also takes care of your business – enhancing productivity and improving customer service. What’s more, where insurance is in place, getting to a sick employee quickly can mitigate costs and possibly prevent an absence from becoming long term.


[1] On a basic benefit level of 50% salary, no escalation, 28 week deferred period and payments only continuing for three years for 28 employees would cost £2,614.