Most companies know that scheduled downtime, like vacation and holidays, costs money, and they figure it into their labor burden. But what about unpaid time off?
Halsey Platt recently discovered that absenteeism is a bigger drain on his company's profits than he'd ever imagined. Platt had always been lax about granting his employees at Walter Platt Builders & Cabinetmakers in Groton, Mass., permission for unpaid days off. But last year, requests by employees to take an extra day off without pay around the mid-week Christmas and New Year's holidays prompted him and his production manager to figure out the cost.
They discovered that the company's 19 field employees accounted for 141 unpaid days off in 2002. Because each employee generates about $1,000 per day in gross revenue, "It means we could have produced one more $141,000 job this year," says Platt. Given that overhead for the year was covered without the additional revenue, a standard 30% margin, or $42,300, would have been pure profit.
Platt has since put together a total compensation worksheet showing that the company's generous benefit package -- paid vacation, full health and dental coverage, a 5% match 401(k), and profit sharing -- costs between $40 and $60 per man day. Employees now understand that those costs are there whether they come to work or not.
Employee reaction has been positive. Most had never tallied up all the money they were losing by taking extra days off unpaid. And all were surprised to learn that the gross profit from that "extra" job would have gone straight to the bottom line, increasing their profit sharing pool.
Platt's also working on an equitable policy for a set number of personal days. "We don't want people to feel that if they take the day off they're costing the company money," says Platt. "If they're sick, we want them to get better."