The hidden cost of employee sickness has reached a staggering £103 billion in 2023, an increase of £30 billion since 2018, according to the latest report from the Institute for Public Policy Research (IPPR). This figure represents not just a significant financial burden on UK businesses but highlights a growing challenge that impacts productivity, workplace culture, and ultimately, your bottom line.
The current landscape of workplace absence in the UK
Recent research paints a concerning picture for employers across Britain. The Chartered Institute of Personnel and Development (CIPD) and Simplyhealth's joint research reveals that employees were absent for an average of 7.8 days over the past year, marking a substantial rise from the pre-pandemic rate of 5.8 days.
This trend doesn't affect all organisations equally. The public sector reports significantly higher average absence levels at 10.6 days per employee compared to their private sector counterparts. Company size also plays a crucial role in absence patterns. Smaller organisations with 50 or fewer staff recorded lower sickness absence rates (5.0 days per employee) than larger ones with 5,000 or more employees (13.3 days per employee), says the Chartered Institute of Payroll Professionals.
What's particularly troubling for employers is how these figures translate into tangible costs. Moorepay calculates that for small businesses with under 250 employees, absenteeism costs approximately £547 per employee annually. Companies with 250-999 employees lose about £429 per employee, while large businesses with over 1,000 employees face a substantial £702 per person per year.
Despite these concerning figures, many organisations remain unaware of the true financial impact. Over a third of businesses admit they have no idea how much absenteeism costs them, even though more than 70% acknowledge that absence directly affects their profitability.
Over a third of businesses admit they have no idea how much absenteeism costs them
The financial burden: breaking down the true cost of absenteeism
When calculating the cost of employee absence, many organisations focus solely on direct costs such as sick pay. However, the financial impact extends far beyond these obvious expenses.
What are the direct costs of absenteeism?
The most visible expense is the salary paid to absent employees. When staff members are unable to work due to illness yet receive sick pay, companies essentially pay for work that isn't being completed. Moorepay's basic calculation forms the foundation of absence cost analysis:
Average employee day rate (total salary ÷ total number of employees ÷ number of working days in a year) × total number of absence days.
For private sector employers, this direct cost averages £568 per employee annually.
What are the indirect costs of staff absenteeism?
These less obvious expenses can significantly increase the financial burden:
Replacement labour: Costs of temporary staff or agency workers to cover absences
Overtime payments: Additional hours worked by existing staff to compensate for absent colleagues
Administrative costs: Time spent by HR and managers handling absence-related tasks
Training costs: For temporary replacement staff
Reduced service quality: Impact on customer satisfaction and retention
Decreased team morale: Affecting the productivity of present employees
Research from the Institute for Employment Studies suggests that between 2% and 16% of an organisation's annual salary bill may be spent on absence, with only about half of this amount attributed to direct costs.
What are the hidden costs of staff absenteeism?
Perhaps most concerning is the financial impact of "presenteeism", when employees attend work while unwell. IPPR research shows that on average, employees lost the equivalent of 44 days of productivity due to working through sickness, up from 35 days in 2018. They also lost 6.7 days through taking sick leave, an increase from 3.7 days in 2018.
The research concluded that health and work are interacting in a "vicious circle" in Britain today, with UK employees more likely to work through sickness compared with their peers in other OECD and European countries.
This has a considerable impact on productivity. Of the £30 billion increase in costs since 2018, £25 billion was caused by lower productivity due to presenteeism, with only £5 billion attributed to increased numbers of sick days.
The growing challenge of presenteeism
Presenteeism, working while unwell, has become a significant issue for UK employers. This phenomenon doesn't just affect productivity; it can extend illness duration and lead to more serious health problems down the line.
What groups are more likely to work through poor health?
Working through poor health is more common among certain groups:
Those from marginalised ethnic groups
People in lower-quality jobs
Workers lacking formal qualifications
According to the IPPR report, Black or Asian workers are twice as likely to work through sickness compared with those who are white British.
There are a number of factors at play, and some are societal and an outcome of infrastructure. People with lower qualifications tend to have a lower income and may not be in a longer-term employment contract and may feel the need to work - and earn - through a period of ill health. The Employment Rights Bill aims to address some of these inequalities, with more rights for sickeness absence payments from Day One. Not being able to earn for a day makes a real difference to someone who relies on every penny coming in. Addressing imbalances like this may help.
Why do employees work through illness?
Several additional factors contribute to the presenteeism trend:
Company culture: Not taking time off can be seen as a badge of honour in some workplaces
Financial insecurity: Limited sick pay benefits may force employees to work while unwell
Job insecurity: Fear of negative perception or job loss
Excessive workloads: Backlog anxiety pushes employees to avoid taking time off
Persistent culture of long hours: Despite research showing longer hours don't increase productivity
Company culture plays a significant role, and if the manager or CEO works through illness then there is an expectation that the staff must do so as well. However, productivity and long hours do not always equate; in fact, it is often the opposite.
What are the primary causes of workplace absence?
Understanding what drives absenteeism is crucial for addressing it effectively. The CIPD research highlights several key factors:
Short-term absence drivers
Minor illnesses: Reported by 94% of organisations as a leading cause
Musculoskeletal injuries: Affecting 45% of workplaces
Mental health issues: Cited by 39% of organisations
COVID-19: Still a significant factor, mentioned by 37% of organisations
Long-term absence drivers
Mental health problems: The primary cause at 63%
Acute medical conditions: Including stroke or cancer (51%)
Musculoskeletal injuries: Also at 51%
Stress plays a significant role in both short- and long-term absences, with over 76% of survey respondents reporting stress-related absenteeism in the past year. The main causes were:
Heavy workloads: Identified by 67% of organisations
Management style: Cited by 37% of organisations
Financial stress is increasingly recognised as a driver of workplace absence. It's estimated that absenteeism due to financial distress cost UK employers £3.7 billion in 2023 – up from £2.5 billion in 2021.
How to calculate the cost of absenteeism for your organisation
To understand the true financial impact of absence on your specific organisation, you need a systematic approach that captures both direct and indirect costs.
Basic calculation method for calculating absenteeism costs
Start with this simple formula to establish a baseline:
Calculate your average employee day rate: Total salary ÷ total number of employees ÷ number of working days in a year
Multiply this rate by the total number of absence days across your organisation
Comprehensive calculation method for calculating absenteeism costs
For a more accurate assessment, include these additional elements:
Indirect costs: Typically around 20% of the direct absence cost
Employer pension contributions: Usually about 2-3% of costs
Unreported absence: Estimated at approximately 10% of total absence costs
Real-world example for calculating absenteeism costs
Number of employees: 300
Wage bill: £8.28 million (average £27,600 per employee)
Average absence days per employee: 4.57
Direct absence cost: £485 per employee
Indirect costs: £97 per employee
Pension contribution: £13 per employee
Unreported absence cost: £48 per employee
Total cost per employee: £643
Total organisational cost: £192,900
From Moorepay
Sickness absence differences in public/private sector and size of organisation
Public vs private sector differences
The cost impact varies significantly between sectors. In the public sector, where absence rates are higher (10.6 days per employee), the financial burden is correspondingly greater than in the private sector.
Organisation size comparison
Based on case studies from retail environments:
Small store (61 employees): Absence costs 11.2% of basic pay
Medium store (117 employees): Absence costs 6.8% of basic pay
Large store (1,216 employees): Absence costs 16.4% of basic pay
This data suggests that while mid-sized organisations might manage absence most efficiently, both small and large businesses face proportionally higher costs.
What is the impact of absenteeism on business performance?
Absenteeism affects more than just direct financial metrics. Its influence extends throughout your organisation in ways that might not be immediately obvious.
Productivity loss
Beyond the simple calculation of days lost, absence creates ripple effects:
Workflow disruptions: Projects delayed or deliverables missed
Knowledge gaps: Temporary staff lacking specific expertise
Management time diverted: Leaders focusing on coverage issues rather than strategic priorities
Team dynamics affected: Increased workload on present staff affecting motivation
Client and customer relationships
When key staff are absent:
Service consistency suffers: Different team members may handle client relationships differently
Institutional knowledge is unavailable: Important client history may be missed
Response times increase: Affecting customer satisfaction
Quality control issues: Less experienced staff may not maintain the same standards
Workplace culture impact
Persistent absence patterns can:
Reduce team cohesion: Creating divisions between frequently absent and present staff
Lower morale: Increasing workloads for present employees
Create resentment: When absence management policies seem inconsistently applied
Signal deeper issues: Potentially indicating problems with management, workload, or workplace environment
What are evidence-based strategies to reduce absenteeism costs?
Building on the research findings, here are practical, evidence-based approaches to address the growing cost of workplace absence:
Address the root causes of stress
With stress being a primary driver of absence, target the main causes:
Workload management: Review work distribution and resource allocation
Management training: Equip managers with skills to support team wellbeing
Clear communication: Establish transparent expectations and feedback channels
Autonomy: Give employees appropriate control over their work
Mental health support
The CIPD research shows mental health is a leading cause of long-term absence:
Mental health first aid training: For managers and selected staff members
Reducing stigma: Creating an environment where mental health can be discussed openly
Proactive check-ins: Regular wellbeing conversations before issues escalate
Physical health initiatives
To address musculoskeletal and other physical health issues:
Ergonomic assessments: via Verve Proactive Services, particularly important with hybrid working arrangements
Health screenings: Early identification of potential issues
Physical activity promotion: Supporting active lifestyles
Workplace adjustments: For employees with existing conditions
Financial wellbeing
With financial distress costing employers billions in absence:
Financial education: Workshops and resources
Salary finance schemes: Ethical alternatives to high-interest loans
Benefits review: Ensuring your package helps with cost-of-living challenges
Signposting to support: Information about debt advice and financial assistance
Absence management processes
Effective systems can reduce both the frequency and duration of absences:
Clear policies: Well-communicated, fair and consistently applied
Return to work interviews: Supportive conversations to identify any workplace adjustments needed
Data tracking: Monitoring patterns to identify underlying issues
Occupational health involvement: Early referral for appropriate cases
How do I develop a business case for investing in employee health?
Addressing absenteeism isn't just about reducing costs; it's about creating value through a healthier, more engaged workforce. When compiling your business case, stress the following tangible and intangible aspects:
Return on investment
Research consistently shows that wellbeing interventions yield positive returns, with a £4.70 return on every pound spent on mental health interventions alone:
Preventative approach: Addressing issues before they lead to absence
Productivity gains: Healthier employees perform better
Reduced presenteeism: Staff working at full capacity rather than while unwell
Talent retention: Lower turnover among employees who feel supported
Competitive advantage
In today's tight employment market:
Employer brand enhancement: Reputation as an employer who cares for staff wellbeing
Attraction of talent: Increasingly, candidates prioritise wellbeing support in job searches
Diverse workforce retention: Supporting employees from all backgrounds to thrive
Long-term business sustainability
Investment in employee health supports:
Organisational resilience: Better able to weather challenges and change
Knowledge retention: Keeping experienced staff within the business
Succession planning: Developing talent for future leadership
Reduced insurance and liability costs: Fewer workplace health incidents
Speak to the experts with 30 years of NHS experience serving a 2million population
How can Verve Healthcare help to reduce sickness absence?
With 30 years of NHS experience, Verve Healthcare can help you address the challenge of workplace absence with practical, proven approaches:
Workplace health assessments: Identifying specific risk factors for your staff, identifying an issue before it escalates into a problem
Customised wellbeing programmes: Mental health, physiotherapy and GP services tailored to your workforce demographics and needs
Return to work support: Helping employees transition back successfully
Reducing financial spend: Our pay-as-you-go approach means you only pay for the appointments your staff actually use, so you can laser-focus your support for your people
Our approach is built on our core values of love, trust, accessibility, and patient-centric care, always delivered with a proactive mindset.
Why reducing absenteeism can save money
The financial impact of absenteeism on UK employers is substantial and growing. At £103 billion annually, the cost affects businesses of all sizes across all sectors. However, understanding the true causes and implementing evidence-based strategies means you can turn this challenge into an opportunity.
The data is clear; organisations that invest in employee health and wellbeing see returns not just in reduced absence costs but in enhanced productivity, improved retention, and stronger business performance overall.
A healthy, happy workforce isn't just the right thing to aim for, it makes good business sense. Taking a proactive approach to absence management and employee wellbeing can reduce costs while creating a workplace where people thrive.
Want to learn how Verve Healthcare can help you create a healthier, more productive workforce? Get in touch today for a free consultation and discover how our 30 years of healthcare expertise can support your specific business needs.
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