Reducing the impact of presenteeism can create healthier employees and improve your business' bottom line.

The Presenteeism costs identified in the study are made up of:

• the direct cost faced by employers due to on-the-job productivity losses caused by presenteeism; and

• the indirect cost to the Australian economy due to lower labour productivity and other second round effects.

Two different scenarios were modelled, one reflecting the current situation where presenteeism is prevalent, and one where presenteeism did not exist.

The differences in economic outcomes for these two scenarios were calculated to determine the cost of presenteeism.

The study considered the impacts of presenteeism resulting from 12 medical conditions:

• allergies

• arthritis

• asthma

• back, neck and spinal problems

• cancer

• depression

• diabetes

• heart disease

• hypertension

• migraines/headaches

• respiratory disorders

• skin conditions.

The study estimated the loss in productivity resulting for each of the 12 medical conditions. This involved applying data on the prevalence of each condition in the Australian working population to international estimates of on-the-job productivity losses from each condition1.

What is presenteeism?

Presenteeism is the loss of productivity that occurs when employees come to work, but aren’t fully functioning because of an illness or injury. When compared to Absenteeism, Presenteeism is considerably less visible in the workplace and harder to quantify.

Research commissioned by Medibank Private, conducted by Econtech, an independent economic consultancy, has identified the costs and impacts of presenteeism on the Australian workforce and economy.  This study and previous international research demonstrates that presenteeism significantly impacts workplace productivity, which in turn affects the economic viability of individual business, and the Australian economy as a whole.

It is clear that this health related issue represents a problem for business and the economy. This is why Medibank Private has been working to increase awareness of the benefits of workplaces that foster a healthy environment for employees.

By investing in strategies and programs that support the health and wellbeing of employees, businesses can work towards minimising the impact of Presenteeism, to improve productivity in the workplace, and thereby increase their profit margins.

In the first Australian study of its type, a specialist model was used to calculate the cost to the Australian economy of productivity losses due to presenteeism in the workplace.

The cost of Presenteeism

The study calculated that the overall cost of presenteeism to the Australian economy in 2005/06 was $25.7 billion (Figure 1).

This equates to a long term decrease in the national Gross Domestic Product (GDP) of 2.79% and an ongoing 3.33% reduction in private consumption.

The results of the study also found the on-flow of labour productivity losses lead to a general reduction in exports, imports and investment. In fact, when compared to a no presenteeism scenario, exports are 2.8% lower and imports are 1.99% lower.

These costs take into account both the direct and indirect costs of presenteeism to business and the Australian economy as a whole.

• 68% of the total cost of presenteeism is the direct cost from on-the-job productivity losses.

• 32% of the total cost of presenteeism is the indirect cost that occurs as productivity losses filter through the economy.

This study is the first to assess the cost of presenteeism on the Australian economy and the first international study that estimates both the direct and indirect costs of presenteeism for business and the economy. Neglecting the indirect cost can seriously underestimate the total cost of presenteeism to the Australian economy.

Research commissioned by Medibank Private in 2005 found that absenteeism is costing the Australian economy $7 billion each year. This is far less than the $25.7 billion this study has attributed to presenteeism and highlights that the economic cost associated with presenteeism is nearly four times the cost of absenteeism.  This is consistent with research in the United States2 that estimated the cost of presenteeism to be three times higher than the cost of Absenteeism.

Presenteeism has a direct impact on levels of on-the-job productivity.  The study found this direct impact on productivity costs Australian business $17.6 billion a year.

Results from the study highlight that the average productivity loss per employee is 2.54%. This corresponds to a loss of six working days per employee per year for an average Australian worker.

This lost productivity has a direct impact on business bottom line. US research reviewed as part of this study1 found the cost of presenteeism corresponds to approximately 3% of a company’s gross wage sum.

If businesses address and improve presenteeism by investing in the health of staff, employers can improve productivity and potentially improve staff retention, which flows through to an improved bottom line.

The causes of Presenteeism

The study discusses four main causes of presenteeism:

Illness has a detrimental effect on both the quality and quantity of work undertaken by employees. For example, the loss of productivity may be apparent in staff working more slowly than usual, needing to repeat tasks or making more mistakes.

The study found that the conditions (Figure 2) that are the biggest contributors to the overall productivity loss caused by presenteeism are depression (19%), and allergies (19%), followed by hypertension (14%) and diabetes (9%).

The conditions considered in the study focus on those that have higher costs to employers. This selection generally includes chronic conditions and does not include illnesses like influenza or the common cold. However, Medibank Private recognises that these conditions may also impact employee productivity and contribute to the impact of presenteeism.

Medibank Private also recognises obesity is a serious concern for the health and wellbeing of the Australian workforce. Although the study does not include a dedicated category for obesity, it captures data concerning health conditions that can be related to obesity, such as heart disease, diabetes and hypertension.

Figure 2

If steps are taken to reduce presenteeism, company performance and profitability can be improved. The level of improvement depends on the cost that presenteeism represents for an individual company.

Therefore, it is important that businesses identify their own presenteeism costs and cost-effective measures that can be taken to recover some, if not all, of the on-the job productivity lost to employee health conditions.

Strategies to reduce presenteeism can also support and improve the health and wellbeing of employees. These strategies include:

• health risk assessments to gather information from employees on conditions that may cause future health problems;

• employee assistance programs which offer counselling services for employees and their families; and

• wellness programs which foster healthy practices such as a balanced diet and exercising.

The study also highlighted that those companies that are among the first to introduce presenteeism reducing measures are likely to benefit to a larger degree from potential productivity gains than those businesses that wait.  Importantly, investing in employee health can create a win-win situation for employers and employees alike.

Employees can enjoy better health and improved quality of life while companies realise more productivity from their employees.

What businesses can do

Workplace focus

• 53% of staff took one or more days off work in the last 4 weeks, however 77% attended work while suffering with a health problem over the same period.

• 88% of staff that attended work while suffering from a health condition felt they were less productive.

• On average, staff who attended work while suffering from a health condition reported their productivity diminished by 45%.

Employees were asked to indicate how their health and wellbeing at work affected their ability to do everyday workplace tasks. The results showed that when employees were suffering from a health related condition:

• 78% found it difficult to think clearly when working.

• 66% found it difficult to do their work without making mistakes.

• 64% did not feel they had done all they are capable of doing.

• 67% found it difficult to work the number of hours required.

• 62% found it difficult to do their work without stopping to take unscheduled breaks or rests.

Medibank Private uses a number of approaches to assist its own employees to better manage their health and wellbeing.

These include:

• Heartbeat website – staff have access to an online health management tool to complete self assessments, set goals, and receive regular email advice on important health and wellbeing topics.

• Employee Assistance Program - counselling service to help employees and their immediate family members manage health and wellbeing issues.

• Good Health Day - an extra day of leave to enhance personal wellbeing.

• Flu vaccinations

• Discounted health insurance.

Australia’s largest private health insurer, Medibank Private, has recognised the need for a tailor-made health cover option for the corporate market.

This research was conducted by Econtech on behalf of Medibank Private.  Econtech is one of Australia’s leading independent economic consultancies, with an emphasis on economic modelling. Specialising in consulting on taxation, policy and forecasting, as well as forecasting reports and software, Econtech works with government organisations, industry bodies and corporations in Australia and overseas.