Consolidated Industries, an 1, 800 employee firm, is faced with a serious and gr
ID: 2923750 • Letter: C
Question
Consolidated Industries, an 1, 800 employee firm, is faced with a serious and growing absenteeism problem. Last year, total employee hours lost to abseeteeism totaled 119,808. Of total employees absent, 65% were blue collar, (wage of 25.15 per hour), 25% were clerical (wage of 19.80 per hour) and the remainder were professional and management (average salary of 37.60 per hour). On average the firm spends 38% more of each employee's salary on benefits and as company policy, pays workers even if absent. The 45 supervisors (average salary of 29.35 per hour) involved in the employee absenteesim problems estimate that they lose 40 minutes per day for each of the 245 days per wrok year just dealing with the extra problems imposed by those who don't show up for work. The company estimates that it loses $729,500 in additional overtime premiums, in extra hired help, and in lost productivity from the more highly skilled abscenses. Estimate the cost of employee abseenteeism so that management can better understand the dimensions fo the problem.
Explanation / Answer
Benefits spent on all types of workers which are paid even in case of absenteeism:
Formula = Total absenteeism in hours x percentage absenteeism in the respective category ( expressed in fraction term ) x average wage / hour x 0.38 ( i.e. 38%)
For blue collared workers = 119808 x 0.65 x 25.15 x 0.38 = $ 744253.28
For clerical workers = 119808 x 0.25 x 19.80 x 0.38 = $225358.84
For management and professional = 119808 x 0.1 x 37.60 x 0.38 =$171181.67
Total benefits to be paid , $ ( sum of all three) = $ 1140793.79
Value , $
Loss due to payment of benefits
1140793.79
Loss due to 45 supervisors losing 40 minutes per day for each of 245 days work @ $29.35 / hour
45 x 40/60 x 245 x 29.35 = 215722.50
Additional overtime premium
729500
Cost of employee absenteeism ( sum of all above values)
2086016.29
COST OF EMPLOYEE ABSENTEEISM ( rounded off to nearest whole number) = $ 2086016
Value , $
Loss due to payment of benefits
1140793.79
Loss due to 45 supervisors losing 40 minutes per day for each of 245 days work @ $29.35 / hour
45 x 40/60 x 245 x 29.35 = 215722.50
Additional overtime premium
729500
Cost of employee absenteeism ( sum of all above values)
2086016.29
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