Monday Mornings with Madison

The Cost of Employee Tardiness

Employees are every company’s greatest asset and resource.  Each worker brings his/her talents and skills to bear on behalf of the organization.  Ingenuity.  Creativity.  Problem-solving.  Writing.  Speaking.  Listening.  Coordination.  Instruction.  Persuasion.  Negotiation.  Judging.  Decision-making.  They provide a wealth of skills and talents that no computer or robot can perform as well.  Yet, human resources are also the most time-consuming, difficult to manage and maintain, and fluid of all company assets.

Unlike machines or inanimate objects, people have feelings and personal problems that can affect their work.  They are impacted by forces outside their control such as children, weather and traffic.  Sometimes they are just having ‘bad days.’  In short, they are human.  These personal issues can not only bleed into their work life in minor ways such as reduced concentration, inability to stay focused on work, or expressing a bad attitude, employee problems can also eat into company profits.  There are a number of ways in which employee issues can affect work behavior which, in turn, result in tangible costs to a company.  One of the most common work-related behavior issues is tardiness.  Anyone – probably everyone – is late to work once in a while.  But when this work-related behavior is chronic, it is not just minor irritation for a company…. it affects the bottom line.  At what point should tardiness be addressed?  And just how much does this work-related behavior cost companies?

Tardiness:  A Growing Problem

A U.S.-nationwide survey conducted by CareerBuilder a year ago asked 7,780 employees and 3,023 hiring managers, from across a broad cross-section of industry segments and company sizes, about work tardiness.  Despite the difficult job market and high unemployment, it turns out that tardiness is on the rise.

  • 16% of workers reported they arrive late to work once a week (as in every week), up from 15% the previous year.
  • 27% of workers arrive late to work at least once a month, up from 26% the previous year.

The top three reasons given for getting to work late were traffic (31%), lack of sleep (18%), and bad weather (11%).

Interestingly, 44% of the hiring managers surveyed said they didn’t care if their employees were late as long as the work was completed on time and with good quality.  On the other hand, 20% of the hiring managers surveyed indicated that they would fire an employee that was tardy more than four times in a year, even if it was a good employee.  Those are clearly extreme opposite views on this issue.

The Cost of Tardiness

Given that views on tardiness vary so widely, one wonders just how much tardiness costs companies?  Is it really an issue?  Can the cost of tardiness even be calculated?

Indeed it can.  Just as companies that sell their time have methods to quantify on-the-job time usage, so too can lost productivity be calculated when employees are not working.  The cost is well beyond the simple cost of their hourly wage (regardless of whether they are paid hourly or are paid a salary).  One company developed a multiplier which uses an employee’s raw gross salary multiplied by 2.71.  This estimated the cost of their time plus office space plus overhead plus benefits plus consumable materials to calculate the actual value of an hour’s worth of an employee’s time.  This is called “cost-loaded time”.  That figure represents the real cost of lost productivity when an employee is late because all of the costs – such as overhead and office space – must still be paid, whether the employee is there doing the work or not.  The multiplier varies from company to company, depending on the cost of those variables, but that multiplier is basically accurate.

Here is an example.  An employee earning a salary of $55,000 per year would have an hourly rate of about $26.44 per hour.  Using the average 2.71 multiplier for “cost-loaded time,” that employee’s time would be valued at $71.66 per hour.  If that employee was then late 15 minutes once a week, it would cost the company $17.92 for the 15 minutes of lost time.  If that employee was late once a week, just 15 minutes, every week the entire year, then the company would lose $931.56 in employee productivity.  Assuming that 16% of a company’s employees were late once a week just 15 minutes (per the survey results) – if the company had 100 employees who all earned an average salary of $55K — the company would lose $14,905 in one year just to tardiness.

Solutions to Tardiness

Because of the tangible cost of tardiness, one company implemented a tardiness policy in which every minute that an hourly employee clocked in late was counted.  Employees that were more than 200 minutes late at the end of the year were not given a raise nor did they participate in the annual profit sharing bonus. Several written warnings were issued throughout the year when an employee reached levels of 50, 100, and 150 minutes of tardiness.  To be expected, employees that failed to get a raise or profit sharing bonus would leave the company shortly after the first time they missed their raise and bonus.  The company even terminated a good, long-term employee who was seriously late (over an hour) four times in one year.  The reasons included very bad weather, a train delay, a child’s illness requiring a doctor’s visit and a water leak at home.  But the cumulative minutes tardy to work exceeded 200 minutes and the employee was terminated.  As a result of the strict policy, the employer had a 60% turn-over rate, increasing the company’s cost to recruit, hire and train replacements.

Clearly, for companies, the key to dealing with tardiness is to develop a comprehensive yet compassionate policy in which the cost of the solution is not higher than the cost of the problem.  Moreover, the rules for tardiness have to be balanced against the time demands made on employees before and after the work day.  Given the widespread use of smart phones and the ability for employees to log in to work at home, an employee’s day may extend beyond work hours, including responding to emails, dealing with clients and completing work during off-hours.  All time and contributions made by the employee to the job should be factored when setting and implementing policies on tardiness.

Laws Regulating Tardiness

There actually aren’t any laws regulating tardiness at work.  According to the U.S. Department of Labor, federal law indicates that tardiness is an employer-employee issue and an employer can set any policy they deem necessary for the operation of their business.  Excessive tardiness is grounds for termination with cause, which means the employee would receive no unemployment benefits, if that is the company’s policy.  Companies should have a set policy for absenteeism and tardiness and should communicate that policy to all employees.  However, companies are not required to have such a policy by law.  But, if a company fails to communicate its policy prior to terminating an employee for either absenteeism or tardiness, then the termination would be considered without cause and thus the employee could qualify for unemployment compensation.

Each company must consider the nuances of its workplace and determine what policies make the most sense for its employees… keeping in mind the needs and demands of hourly and salaried workers.  Ultimately, tardiness must be addressed when an employee demonstrates a chronic disregard for a company or department’s schedule and when that time is regularly not recouped by the company at other times.

Quote of the Week

“People count the faults of those who keep them waiting.”
French Proverb


© 2012, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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