Signature
C_HC = D_a / 7 * H * w
| Inputs | Definition | Unit |
|---|---|---|
D_a | Length of the absence from its start to the return to work, in calendar days | calendar days |
H | Hours the worker normally works in a week | hours per week |
w | Gross hourly earnings including employer on-costs, or another stated value of an hour of work | currency per hour |
C_HC | Value of the paid work lost over the whole absence | currency in the stated price year per worker |
|---|
Function
Absenteeism measurement and valuation function
Maps the time a worker is absent from paid work because of ill health, the usual hours worked and a value per hour to the share of working time lost and to a productivity cost. The value depends on the method: the human capital approach counts the whole absence, while the friction cost method counts only the period an employer needs to restore production.
Try this function
Implementations
Excel
Human capital absence cost
With calendar days absent in DaysAbsent, weekly hours in WeeklyHours and the hourly value in HourlyValue, Excel returns the cost.
=DaysAbsent/7*WeeklyHours*HourlyValue
Assumptions
Absent time spread evenly over the working week
Dividing calendar days by 7 and multiplying by weekly hours assumes the absence covers whole weeks or that working days are spread evenly within them. For short absences the working days actually missed are counted instead.
Output lost for the whole absence
The approach assumes that no one makes up the work and that the worker is not replaced, so every absent hour is lost production, whatever the length of the absence.
Worked examples
Forty-week absence valued by human capital
A worker absent for 40 weeks, 280 calendar days, who normally works 37.5 hours a week at a value of 30 pounds an hour, has a productivity cost of 45,000 pounds, as in the article. The figures are illustrative.
D_a = 280; H = 37.5; w = 30; C_HC = 45000
Common errors
Valuing absence by sick pay or benefits
Sick pay and sickness benefits are transfer payments: they change who bears the loss of production, not its size, and are left out of the productivity cost to society.
Including productivity costs in the NICE reference case
The NICE reference case takes an NHS and personal social services perspective on costs and excludes productivity costs. They can be shown separately as additional information when they may be a critical part of the value of the technology.
Sources
Human capital valuation at gross employee compensation
Pike J, Grosse SD. Friction cost estimates of productivity costs in cost-of-illness studies in comparison with human capital estimates: a review. Applied Health Economics and Health Policy. 2018;16(6):765-778. Section II, human capital approach (value of lost productive time; standard practice to use gross earnings including payroll taxes and employer-paid benefits, the full cost of employee compensation).
NICE exclusion of productivity costs
National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance: the manual (PMG36). Published 31 January 2022, last updated 31 March 2026. Chapter 4 Economic evaluation, sections 4.2.7 and 4.2.9 (NHS and PSS perspective on costs; productivity costs should not be included) and 4.4.23 (productivity costs excluded from the reference case, may be presented separately when a critical component of the value of the technology).
Transfer payments excluded from costs
Tan-Torres Edejer T, Baltussen R, Adam T, Hutubessy R, Acharya A, Evans DB, Murray CJL, editors. Making choices in health: WHO guide to cost-effectiveness analysis. Geneva: World Health Organization; 2003. Section 3.2.2 Transfer payments (sickness benefits signify a change in command over resources, not a change in the aggregate value of resources, and are generally excluded).
Canonical Identity
Stable URI · Machine-readable · Resolvable · CC BY 4.0