If this is the case at your organisation, then you are not alone - the Chartered Institute for Personnel and Development’'s (CIPD) Employee absence 2004: A survey of management policy and practice showed that over 90% of employers rate sick pay as a significant cost.

To run through the basics, statutory sick pay (SSP) was introduced in 1983. The current rate is £66.15 per week paid up to 28 weeks before the state-funded incapacity benefit kicks in. Workers who earn £79 per week can get SSP, which is paid out after an initial three day absence.

But many bosses are far more generous. Financial firm Towry Law Group is a typical example of an organisation that pays staff their full wage when they are ill. The upshot of this type of generosity is that provision varies widely between organisations, with the only rule being that firms can offer their own sick pay package provided it is at least as comprehensive as SSP.

Most employers operate with an eye firmly on the bottom line, so it seems altruistic to pay a sick rate way above the state minimum. However, Mike Emmott, employee relations adviser at the CIPD says: "I think employers see it as convenient not to deduct from normal pay."

The Inland Revenue requires employees to keep records of when and why SSP is not paid, as well as record absences beyond three days. Employers can get from the Revenue all the relevant documents needed to track SSP.

Employers also need to be aware that the Employment Rights Act (1996) requires them to keep staff briefed on their rights and obligations, while the Data Protection Act (1998) and the Disability Discrimination Act (1995) requires employers to make "reasonable adjustments" to accommodate staff.

Lost time due to staff taking ’sickies’ is a problem for most firms. CIPD employee relations adviser Ben Willmott points out that some organisations have tried to combat absence through measures such as attendance bonus schemes. Eurotunnel is reported to be one organisation that has trialed such bonuses - it includes an attendance target among wider performance criteria.

Willmott explains that attendance incentives are an option available to employers, but should only be used "as part of a managed, consistent approach. They shouldn’t be seen in isolation."

However, Willmott’s colleague Emmott is more sceptical about attendance bonuses. "I think that it’s done as a bit of a stunt. It is a mistake," he says. "[With an attendance incentive] benefit there’s always going to be unfairness when it comes to the time when sickness is beyond anyone’s power."

Sick pay provisions clearly do not come cheaply - the CIPD average it at £588 per worker per year. Add the cost of replacement staff and it is little wonder that strategies to measure absence costs are being built into payroll systems.

The first hurdle for firms to overcome is to introduce absence measurement. Fewer than half of organisations even measure absence, according to the CIPD, which it says is necessary in order to track the effect on profit.

Graham Cooke, managing director at financial consultants, Jardine Lloyd Thompson concurs: "Often we [tell] [organisations]: ’You [must] identify your absence costs first’."

Looking at functionality, Richard Twelvetrees, business development manager at software provider Snowdrop Systems, says: "The line manager can submit the information and the system can calculate whether SSP is appropriate or whether it needs to be topped up. The application can evaluate [whether] this employee has exhausted occupational sick pay and now should drop back to statutory."

...With fine-tuned payroll administration organisations won't let sick pay slow them down. With the right payroll system in place they might even nail many of those absence costs.