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How employee health and wellbeing affects organisational productivity

Employee health and wellbeing has its most obvious effect on organisational productivity through avoidable employee absence on sick or compensation leave. Less obvious, though still important, are productivity losses sustained where individuals attend work while ill or injured (sometimes referred to as presenteeism). Finally, poor employee health and wellbeing has an indirect effect on productivity through reduced employee engagement levels.


Sick leave is only one component of unscheduled absence recorded in the APS. The other four components are carer's leave, compensation leave, miscellaneous leave and unauthorised absences. An analysis of total unscheduled absence in the APS is provided in Appendix 4.

The provision of paid leave for personal reasons, including ill health, has been a feature of the Australian workplace for many years. Under the National Employment Standards, Australian employees are entitled to a minimum of 10 days paid sick leave per year.20 Sick leave and other leave entitlements, such as carer's leave, can contribute to an organisation being considered a ‘family friendly employer’ and can be part of the attraction for working in an organisation or sector. Public sector employees in Australia, for example, are more likely to be granted a wider range of leave entitlements than are employees in other sectors, in particular the private sector.21

The amount of personal/carer's leave provided under agency enterprise agreements varies considerably across APS agencies. Approximately 15% of employees have access to a personal/carer's leave entitlement of 15 days per year, while 55% have 18 days and another 15% have at least 20 days.

The median sick leave rate across APS agencies in 2013 was 8.6 days of sick leave per employee, which is a slight increase on 2012 (8.5 days). Sick leave rates increase with agency size. This variability is consistent with previous data from the public sector. Additionally, the finding that larger organisations experience higher levels of sick leave use also occurs in the private sector.22

The median sick leave rates for agencies in 2012–13 were:

  • large agencies (>1,000 employees)—9.5 days sick leave per employee
  • medium agencies (251–1,000 employees)—8.4 days sick leave per employee
  • small agencies (<250 employees)—7.8 days sick leave per employee.

One challenge in considering the impact of sick leave on workplace productivity is the extent to which absence due to ill health is a cost to an organisation. Clearly sick leave represents a loss in productivity. However, a sick employee taking appropriate time off from work may minimise productivity losses that would otherwise be incurred, such as prolonging the recovery period or, if infectious, attending work and causing others in the workplace to become ill. The challenge for managers is to minimise the potential causes of illness or injury inherent in the workplace (this is discussed in more detail later in this chapter) while minimising unwarranted absences by employees not genuinely ill or injured. The available data does not permit an estimate of the extent to which sick leave usage (or attendance while ill) in the APS is unwarranted.23

Determining the cost of sick leave is complex. As previously noted, however, access to sick leave may have less impact on productivity than working while sick. Moreover, the impact on agency cash outlays is not straightforward. This might result in financial cost if the workforce needs to be larger to absorb the productivity losses of high sick leave usage (for example, in a call centre where workload is externally driven and cannot be rescheduled by employees). In general, however, small variations in sick leave usage may lead to re-prioritisation of work rather than increased cash outlays. The reverse is also true. If an employee does not take sick leave (that is, the organisation's sick leave is reduced) there are not necessarily direct financial ‘savings'. Rather, if the reduction in sick leave is due to improved health of the workforce there will be gains to the employee and a capability and capacity gain for the organisation, but not necessarily direct financial ‘savings’.

To assist managers and human resource practitioners in managing unscheduled absence (a concept that is broader than sick leave) the Commission has undertaken work to update and revise its extant guidance on this matter. Turned up and Tuned in and Fostering an Attendance Culture were originally published in 2006 and revised guidance for managers on how to identify and manage unwarranted absence from the workplace has been provided to agencies.


Broadly speaking, presenteeism is defined as the productivity loss that occurs when an employee attends work but, because of an illness or injury, is not fully productive. Research has shown that employees who are not well are also more prone to injuries and, if contagious, increase the risk of other employees contracting an illness.

Although a relatively recent concept, presenteeism has been shown to have a greater impact on productivity than absenteeism. An ongoing body of work conducted on behalf of one of Australia's largest health insurers has shown that the productivity losses from presenteeism across the economy can be up to four times as much as losses from absenteeism.24

Figure 4.9 shows that almost half of the APS workforce reported they attended work while suffering from health problems. Figure 4.10 shows that of those who were at work just under 60% reported experiencing some degree of lost productivity. Interestingly, this also means that just over 40% of the workforce who reported they attended work while ill or injured felt they did not lose productivity because of their illness or injury. This result highlights the complex nature of presenteeism and suggests that individual employees play a substantial role in determining their own health and wellbeing outcomes in the workplace.

Figure 4.9 Levels of presenteeism in the APS, 2013

Source: Employee census

Figure 4.10 Impact of presenteeism on APS employee productivity, 2013

Source: Employee census


Somewhat counter-intuitively, Figure 4.11 shows that employees who reported they attended work when unwell were not the most engaged employees. On the contrary, engagement levels were lower for employees who reported they attended work most often when unwell. However, of the employees who attended work when unwell, those who indicated they were most productive—losing no productivity or less than one-quarter of their productivity—were those with the highest engagement levels (Figure 4.12).

Figure 4.11 The relationship between presenteeism and employee engagement, 2013

Source: Employee census

Figure 4.12 The relationship between productivity when unwell and employee engagement, 2013

Source: Employee census


Presenteeism is a complicated and relatively new concept. An employee who is sick and infectious and who turns up to work can have a detrimental effect on their colleagues and their own recovery time, thus having a negative impact on organisational productivity. Conversely, an employee who is unwell but not infectious or required to stay at home to recover (for example, because of physical injuries) and who comes to work can have a positive impact on their own health and wellbeing and contribute to the overall productivity of the workplace, albeit potentially not at 100% effectiveness in many cases.

Presenteeism in the APS context requires further investigation to more fully understand its impact on the employee and workplace. The data presented here also suggests it has a complex relationship with employee engagement that warrants further consideration.


20 Australian Government, Fair Work Act: Part 2–2 National Employment Standards, Commonwealth of Australia, Canberra, (2009).

21 Australian Bureau of Statistics, Employee Earnings, Benefits and Trade Union Membership, Commonwealth of Australia, Canberra (2011).

22 Direct Health Solutions, Absence Management & Wellbeing Survey, (2013).

23 This is not equivalent to the median rate of sick leave taken by APS employees. Rather, agencies report that the average number of days of sick leave is recorded per employee in their agency and this number is used to determine the average usage rate across agencies.

24 Econtech, Economic Modelling of the Cost of Presenteeism in Australia, Medibank Private, (2007).