Jack Parks is a benefits manager in the auto electronics division of USA Motors, a major manufacturer of audio systems and auto electronic ignition systems. After analyzing the impact of absenteeism on the division’s staffing costs for the previous quarter, he became very concerned. What troubled Parks was an agreement negotiated 10 years ago between the national union and USA Motors that, in effect, pays workers for being absent.

The “paid absence” agreement was not supposed to work quite that way. The theory was that by giving workers one week of paid absence against which they could charge personal absences, the company would be encouraging workers to notify their supervisors when they would be gone, so that staffing arrangements could be made and production maintained. In practice, workers discovered that, by not charging off any “paid absences,” they could receive a full week’s pay in June when the company paid off the balance of unused paid absences for the previous year. This cash bonus, as workers had come to think of it, often coincided with the summer vacations taken by many of the 8,000 hourly employees when USA Motors shuts down for inventory.

As Parks learned, employees with chronic absentee records had figured out how to charge off absences using the regular categories (sick days, as well as excused and unexcused absences), and then collect the cash for the week of paid absences. In Parks’ mind, USA Motors might just as well have negotiated a cash bonus for the hourly workers or given them another 10 to 15 cents per hour. After reviewing the division’s absenteeism rates for controllable absences (i.e., those categories of absences believed to be of the employee’s own choice), Parks concludes that the company could reduce this rate from the previous year’s figure of 11%.

And then Parks had a brainstorm: USA Motors needed to negotiate an incentive plan for reducing absenteeism. The plan Parks has in mind entailed a standard for the amount of controllable absence deemed acceptable. If a chronically absent employee exceeded the standard, then vacation, holiday, and sickness/accident pay would be cut by 10% during the next 6 months. If worker absence continues to exceed the allowable limits, then vacation, holiday, and sickness pay would be cut during the next 6 months by the actual percentage of absent days incurred by the chronic absentee. Hence, if a worker misses 15% of scheduled workdays during the first 6-month period, vacation pay for the next 6-month period would be reduced by 10%. If the employee continues to be absent at the 15% rate, then vacation pay would be reduced by 15% during the next six months.

Parks immediately drafted a memorandum outlining the program and submitted it to the corporate HR manager of USA Motors for inclusion in the upcoming bargaining session. To Parks’ surprise and delight, the memorandum received strong corporate support and was scheduled as a high-priority bargaining topic for the fall negotiations.

CASE QUESTIONS 

1. Will the incentive plan to reduce absenteeism succeed? Explain your opinion.

2. How much absenteeism is really under the employee’s control?

3. Why didn’t the paid absence plan work?

4. What plan would you suggest to USA Motors?