Academic journal article Journal of Small Business Management

Precautionary Actions within Small and Medium-Sized Enterprises

Academic journal article Journal of Small Business Management

Precautionary Actions within Small and Medium-Sized Enterprises

Article excerpt

Absenteeism results in considerable costs, both for individuals, firms, and governments. One of the ways in which firms can reduce absenteeism is by taking precautionary actions, that is, improving the physical or mental working conditions of their employees. This study examines the decision-making process of small and medium-sized enterprises on whether to take precautionary actions. The main hypothesis is that firms are more likely to take precautionary actions if they assume that absence rates are related to working conditions. Several hypotheses were derived, and information on more than 600 Dutch enterprises was used to test them. The results indicate that the probability of taking precautionary actions increases with the occurrence of physical complaints, the assumed proportion of employees whose tasks are physically demanding, and firm size. The main hypothesis was, however, rejected.

Introduction

Absenteeism results in considerable costs both for individuals, for firms, and for governments. For the European Union (EU) member states, the total annual cost of medical care, daily allowances, and present and future compensation for cases of permanent disability and death is estimated at approximately 20 billion euro per year (Eurostat 2000). For individual organizations, the main cost of absenteeism is due to production losses (and continued wage payments).

Absence spells are usually classified in one of the following three categories: certificated sickness absence; absence because of accidents; and absence for other reasons (noncertificated absences, strikes, etc.). (1) Employees report absent either because they feel they are unable to work (because of sickness or accidents), or because they choose not to work (Brown and Sessions 1996). Most economic studies focus on the latter explanation: absenteeism is treated by employees as a labor-supply adjustment. This study looks into the first explanation: absence because of sickness or accidents.

Recently, policymakers start to pay attention to absenteeism due to sickness and (occupational) accidents. The main reason for this attention is the number of occupational accidents that takes place. Eurostat has estimated that in 1996 the number of "serious" accidents (that is, resulting in more than three days of absence from work) within EU member states was more than 4.5 million and that about 5,500 people were killed in workplace accidents (Eurostat 2000). In 2000, the European Agency for Safety and Health at Work held an information campaign aimed at reducing the number of work-related accidents (European Agency for Safety and Health at Work 2000a). The main goal of this campaign was to stimulate organizations to take precautionary actions to improve working conditions, because this could reduce the amount of absence due to sickness and accidents (European Agency for Safety and Health at Work 2000b).

The focus of this information campaign was on organizations with less than 50 employees. The reason for this is that the majority of all accidents (resulting in absence spells of more than three days) take place within this size class. These firms account for more than half of total employment within the EU (European Commission 2000). Moreover, while the overall absenteeism rate is known to increase with firm size (Boon 2000), the individual risk of having an accident at work is higher for establishments with less than 50 employees (Eurostat 2000).

This study examines the decision-making process of small and medium-sized enterprises (SMEs) on whether to take precautionary actions. Individual enterprises may implement precautionary actions to reduce the probability that individual employees become absent. The main benefit of such actions, a reduction in absence rates, can be compared with the cost of implementing such actions. Often, firms are not aware of the actual benefits and costs, and will compare expected benefits and costs instead. …

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