So what is LPT you ask? LPT stands for lost productive time. Ever hear of the coined phrase “Time is money”? LPT is synonymous with “Time is money.” You’re probably wondering how is lost productive time relevant to me? Well, guess what? You’re in luck!
How does LPT affect my business or organization?
A study published in the Journal of Occupational Environmental Medicine in 2003 reported that, based on a random sample of 28,902 United States workers, health-related lost productive time (LPT) costs employers a staggering $225.8 billion per year, or $1,685 per employee per year (Stewart, 2003).
That study calculated absenteeism as the sum of hours per week absent from work for a health-related reason. Cost impact is estimated by multiplying lost productive time (absence hours plus hours lost from reduced performance) by the individual worker’s hourly labor cost.
This is the recommended method of calculating the basic impact of absenteeism and its cost to the organization.
So where does the cost of absenteeism go to? Keep on reading...
The Hidden Costs of Absenteeism.
Take a deep breath, because you’ll need it once you realize what you are about to discover...
According to a 2008 survey conducted by Mercer/Marsh (Kronos Consulting & Mercer, LLC., 2009) identified the hidden costs of absenteeism.
To simplify the study we broke down the hidden costs into four categories:
Payroll Costs - when an employee calls out due to illness or other reasons, your payroll costs increase.
Temporary Labor - organizations must hire temporary labor to cover the absent employee’s responsibilities. Most organizations forget to calculate this cost.
Overtime Labor - if an employee calls out, businesses are often required to pay employees overtime, this cost can be staggering especially if your organization has high number of employees. Overtime pay is often overlooked in a desperate effort to obtain employee coverage.
Administrative Expenses - the survey also revealed that many employers fail to account for the 36% in administrative expenses that it takes to manage absence benefits. This includes tracking, reviewing, and processing the absence by the company staff.
But there is one more point made by the study that is even more shocking....
The disruption in the labor supply affects productivity even with replacement staff! This leads ultimately to lost sales, late delivery of goods/services, customer dissatisfaction and loss of revenue. Unplanned absences caused a 54% decrease in productivity/output and a 39% drop in sales/customer service!
Are you throwing money out of the window?
Most businesses do not realize the effect of lost productive time on their bottom line. Unfortunately, many businesses realize the impact when its too late...after they have lost a significant amount of revenue over the course of many years, or even worse, close up shop because of it!
CRUNCH THE NUMBERS!!
Want to calculate your basic LPT cost impact on your business? Simple.
Multiply lost productive time (absence hours plus hours lost from reduced performance) by the individual worker’s hourly labor cost. This is the recommended method of calculating the basic impact of absenteeism and its cost to the organization.
8 absence hours + 6 hours lost from reduced performance X $15/hour = $210.
YES, $210 you just lost from a health related employee call out! (Conservative estimate.)
This is not taking into consideration the aforementioned losses!
So How Do I Reduce My Lost Productive Time?
Stay tuned for our amazing article on...
“Stay Healthy & Lean and Show me the Green!”