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August 20, 2018

Workplace sickness absence

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Workplace absenteeism caused by sickness and injury is costly to individual companies and society as a whole. Lost workdays can slow down production, while frequent and long-term absences reduce workers’ subsequent employment and earnings. It is worthwhile considering the many policies available to reduce sickness absence, since there is substantial variation in rates across companies and countries. In 2013, the average rate of sickness absence in the countries of the OECD was 2.5–3.0%; however, there were significant differences across countries. In Norway, with its generous social security system, the average rate was almost 7%, whereas it was only about 0.1% in Greece. 

Workplace programs that purport to reduce sickness absenteeism are numerous and vary in their effectiveness—something that is also very difficult to assess. It is not possible for employers to monitor perfectly and hence justify completely a worker’s decision to be absent from work, since they can never be fully informed about the condition of a worker’s health. Requiring a doctor’s certificate for the notification of sick leave—mandatory for workers to receive sick pay—can rule out the possibility of employees falsely reporting absence. However, some medical practitioners have been shown to be more lenient than others in providing certificates.

Strong evidence shows that employees respond to negative incentives, for example receiving decreased earnings when absent due to sickness. The strength of a negative incentive is based on the coverage of (or the access to) sick pay, the waiting period before the pay is received, and the maximum duration of the sickness benefit. It is harder to implement programs with negative financial incentives in countries with generous social security systems. A downside of these policies is that if the incentives are too weak, employees may force themselves to go to work while they are sick because they fear financial penalties, risking passing on diseases to their colleagues.  

Conversely, positive incentives such as performance bonuses, where individual employees are rewarded for their output, irrespective of how it is accomplished, appear to be effective. Firm-organized lotteries, for which participation is related to an employee’s previous sickness absence, are another example of a positive reward program. 

Grading systems that enable long-term absentees to return to work with partial responsibility are also effective, as are improvements to the quality of employees’ working conditions, but these can be costly. 

There is limited evidence that sickness absence is also related to workers’ commitment and loyalty. For example, if it becomes costlier to go to work because of a longer commute, workers are more likely to be absent. Strong morale dampens this effect, so a program that improves worker morale could reduce absenteeism.

The settings in which firms operate, their internal production processes, and how responsive employees are to financial incentives influence the effectiveness of all programs intended to address worker absenteeism due to sickness. The effects may be dampened by an increase in potential job offers from alternative employers, implying that general economic conditions in the labor market also importantly affect the rate of absenteeism and the success of programs aimed at reducing it. On the flip side, programs will be more effective in local labor markets where there are many unemployed job seekers. Finally, firms will be less inclined to implement such programs if they can shift the financial burden of sickness absence to generous public social security systems. 

© Wolter Hassink

Read Wolter Hassink's full article How to reduce workplace absenteeism.

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We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.