How much do employee sick days really cost?

Sick leave is a direct cost to a company, that's a fact. Most studies, including from the Australian Government, estimate the average cost at $350 per day, or $3,608 per year, depending on the individual job and industry. But that only looks at half the picture, the direct wage costs. Let’s take a quick run through the real costs to your company...

October 11, 2023

Sick leave is a direct cost to a company, that's a fact. Most studies, including from the Australian Government, estimate the average cost at $350 per day, or $3,608 per year, depending on the individual job and industry.

But that only looks at half the picture, the direct wage costs. Let’s take a quick run through the real costs to your company…

First, and easiest to workout, are those direct wage costs. Assume a wage in line with the Australian average salary, around $90,000. There’s only 260 working days in a year, and with our 12 public holidays here in Australia, that leaves us with a grand total 248 working days per year.

Simple division of those two numbers reveals the average wage per day in Australia is $362.

When your ‘average’ employee is absent, you still have to pay them, so the MINIMUM cost to your business for an average wage-earner is $362 for each and every sick day. But keep in mind, that only represents the direct cost of wages, not the productivity your employees bring to the company. When they’re absent, they’re not producing anything at all that day, and that lack of productivity is a real cost to the business.

Of course, measuring individual employee productivity is not an easy task. At its simplest, productivity is simply the Output generated by an employee, divided by the Input (costs). The higher the output relative to the input, the more productive the employee is. But that output is not always measured in actual revenue for the business - it could also be in any other KPI your company uses to measure productivity.

But no matter how you measure it, we’d likely all agree it would be counter-productive to the company if the cost of having an employee is more than what they produce! Most companies would want even their least productive workers creating an output more than the cost to employ them. Otherwise, what’s the point?

Let me use a verified example – we’ll call him John - working in a clinical health company. John is well valued and paid accordingly. His wage (not including revenue share or bonuses) equates to $650 per day. His monthly revenue budget breaks down to just over $2,850 per day. That means, when he has a sick day, not only does the company still pay him his base wage of $650, they also LOST $2,850 in revenue for that day he’s absent!

Now, in reality the company don’t lose all of that, those appointments are rescheduled and he still earns some or most of it back, but never all of it. And given there is only X hours in any work day, ‘catching up’ really just means not being available for future new appointments, so the missed revenue is both real and measurable.

If you have employees with a revenue or sales budget to meet, it’s easy to work out the real costs to the company in their absence. It’s not as clear cut when it comes to employees that aren’t judged on revenue, but whatever their productivity measure, the bottom line is clear - there is ALWAYS a significant cost to business when an employee is absent.

OK, so can we limit sick days?

There’s no silver bullet, true employee well-being comes from a multi-faceted approach across Physical, Mental and Social health. But there are things any organization can do virtually immediately to start making a difference, with almost no extra effort and very little cost. And that is to focus on the physical health of your workforce, but to do it right. Without sugar coating it, there is clear evidence that physically inactive employees are more likely to require sick leave, and that any improvement in their physical health results in the likelihood of fewer sick days. Not to mention a large host of other benefits (which we won’t go into here).

Consider research by John Hopkins Bloomberg School of Public Health, which concluded that “employees who get at least 75 minutes of vigorous-intensity physical activity per week miss an average of 4.1 fewer days of work per year”. Or a Medibank Private report which concluded “employees with poor overall health status take up to nine times more sick leave than their healthy colleagues”. Or a significant study by Jacobson and Aldana which revealed “non-exercisers were more likely to be absent for more than 7 days when compared to those exercising at least once per week”.

At potentially thousands of dollars per day, every sick day is a significant cost to a business.

To be clear, we’re not expecting any employees to go from nothing to 75 minutes of hard-core exercise. That’s not going to happen. What we’re aiming for is to get them moving just a little more. Encourage them to be a little more active, even for a few minutes a day, and give them the tools to do so. But to do it in a way that hasn’t been done before, and that can connect with every one of your employees.

Think about it – every workforce is really a microcosmos of greater society, with a cross-section of personalities of different ages, sometimes even different generations, with different health levels, likes and dislikes, all coming from a wide variety of locations and cultural backgrounds. The only way to effectively promote an improvement in physical health that can be welcomed by ALL employees is to offer a platform that shares their diversity. One that is inclusive for all, where every one of your employees can find someone to connect with.  

Again, we can’t force anyone to exercise, but we can give them the tools to make it as easy as possible. If we can help to reduce sick leave by even a few percent over your entire workforce, the savings to your company will be significant. In fact, any money you spend will result in a positive Return on Investment.

Talk to us now and see how easy it can be to offer your employees a world-class fitness platform they can use anywhere, anytime, On Demand. Give them a tool that is both effective and extremely inexpensive – in fact, you’ll make money from offering The Fit & Wellness Hub across your organisation.