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In determining the cost of absenteeism in ONO Inc. Cal will require to consider a number aspects associated with absenteeism of all workers to the organization. First, Cal will have to determine what is being measured. In this case all costs associated with the failure of employees to report for or remain at work as scheduled regardless of the reason should be included in the report. He should not include costs related to vacations, holidays, jury duty, and so on. No excusable absenteeism in this case since the underlying fact is that the employee is not available for work as it was scheduled. This is the business perspective Cal should take in preparing the report. The report should include actual and opportunity costs of the absenteeism such as cost of payments for non-work time of absenteeism, costs of managing absenteeism problems, cost of time of replacement of workers and cost of reduced work quantity or quality. In this case opportunity cost means all opportunities foregone that might have been realized if the absent employees were at work (p49-50).
To determine total cost of absenteeism he will have to calculate total employee hours lost to absenteeism for the period under consideration, compute the weighted average wage or salary/hour absent employee, compute cost of employee benefits/hour/employee, and then calculate total compensation lost to absent employees through multiplying total employee hours lost to absenteeism with wages and benefits paid to the worker per hour. The next step will be to determine total supervisory hours lost to employee absenteeism. This step will include computing average hourly supervisory salary/hour and benefits, and calculation of total supervisory salaries lost to managing absenteeism problems by multiplying estimate of total supervisory hours lost to employee absenteeism by average hourly supervisory and benefits. All other costs incidental to absenteeism should be included. To get total cost of absenteeism, Cal should add up total compensation lost to absent employees, total supervisory salaries lost to managing absenteeism and estimate of incidental costs of absenteeism. Finally Cal should determine total cost/no of employees (p50-51). In this case, total employee hours lost due to absenteeism is (67. 375 days * 24 hours) =1617 hours. The paid sick leave should also be included. This will equate to 12*24*11=3168 hours. Total hours lost to employees absenteeism will be 4785 hours. The next step will be to compute cost per lost hour due employees absenteeism. This is $21+ (33% of 21); 21+6.93=$27.93. Total compensation lost to absent employees will then be 4785* 27.93=$133,645.05. Next step is to calculate supervisory cost due to absenteeism. On average 1.5 hour was lost by one supervisor whenever an employ was absent for a day. Therefore, hours lost will be: 1.5*2*67.375=$202.125 hours. Cost of this supervisory will be hours lost multiplied by hour salary/hour +benefits to the supervisor; 202.125* (28+33% of 28) = $7527.135. The incidental costs included cost of employing temporary workers which was $31,100. By adding these figures total cost of absenteeism in ONO Inc will be: $133,645.05 +7527.135+31,100= $172,272.135. Total cost of absenteeism/no of employees=172,272.135/13=$13,251.70. Absenteeism based on days will be supervisory hours lost +employees hour lost to absenteeism: 4785+202.125=4987.125 hours. This hours divided by number of employees will be; 4987.125/ (13*24) =15.97 hours; approximately 16 days.
In interpreting the costs of absenteeism one should have knowledge of what those figures means, determine whether they are average, above average or below average. The type of firm and type of employee (skilled, unskilled, and professional workers.) who are absent should also be considered (p52). Basing this on U.S.A benchmark, in which an average employee misses 2.3 % of scheduled work or an average of 5.5 unscheduled absences per year or slightly more than one week. In Europe benchmark, an average employee misses average of 10 days per year or two weeks. It is evident that this company is incurring cost $13,251.70 per employee owing to absenteeism. This is detrimental to the profitability of ONO Inc. Additionally, the rate of absenteeism (16 days) is above two weeks. Comparing this rate with that of U.S.A it is double than the expected. The rate is also higher than that considered to be average in Europe. Based on this, it will be not misleading to conclude that absenteeism is a serious problem at ONO Inc.
To curb absenteeism in ONO Inc., I have the following recommendations. First, the management should eliminate all sick leaves and give permission for absenteeism to the employees on cases when one reports to be sick. Additionally, the management should review cases under which absenteeism should be allowed i.e. to cases which are reasonably serious and requires the physical presence of the employee in attending to it. The management should also consider reducing benefits accruing to the employees in days they are away from the work. This will ensure that absent employees incur costs that may give them incentive to be at work unless under unavoidable occurrence. The management should also call for a meeting with all employees and let them know that this rate is unacceptable and will not be encouraged henceforth.