Absence recording: The silent legal risk to HR

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Not reporting absence data accurately could have personal repercussions for some staff

Gaining accurate absence data has long been a discussion point for employers, with some doing it effectively but many not. The stakes have become higher though, because when it comes to absence recording employers that aren’t recording it accurately could be failing in their legal duty. Perhaps more concerning: it’s not the business itself that could fall foul of the law but named HR professionals, senior leaders or admin staff.

There are two factors creating this group risk insurance issue. Firstly, the Insurance Act 2015 came into effect in August 2016. The Act imposes a ‘duty of fair presentation’ of relevant facts. It states that the employer’s knowledge is deemed to go from the top down of an organisation, including decision-makers to staff involved in administration. So if an organisation isn’t providing ‘fair presentation’ it could have serious implications for individuals, with errors potentially costly and high-profile.

The second factor is that market reviews of these group risk insurances (group income protection and group life insurance, for instance), show that many employers are not accurately recording sickness absence or they leave gaps in their data.

From an insurer’s perspective, to carry out their role they require information on employees who are absent, the reason for absence, duration and additional information such as prognosis. If inconsistent or inaccurate information is passed to an insurer it is unable to accurately assess and price the risks to the business, in turn affecting the essence of the Insurance Act.

Not recording absence correctly can also affect individual employee claims, as well as prompt a number of other business risks.

For instance, when it comes to individual employees insurers need to be advised of claims within a certain period. Not notifying them in good time may result in the loss of claim monies or even invalidate acceptance of a claim. They could also potentially dispute claims for undeclared or misrepresented absentee details, resulting in a shortfall in a claim payout or the insurance policy being invalidated.

Key risks for the overall business include insurers potentially assuming a worst-case scenario from a pricing perspective or being unwilling to quote if they aren’t confident in the information provided. Premiums could be affected by poor controls over absence or a lack of proactive management, as this can increase the risk of long-term absentees and claimants. Certain policies have in-built financial incentives for early notification of absences to the insurer. Non-compliance can result in the employer forfeiting a premium rebate.

Right now it’s a good idea for employers to take stock of their approach to absence recording. Good practice includes implementing an absence management policy and process that is consistently followed by all employees and line managers.

It’s important to record all absences from day one, ideally using a system built for this purpose, and to build in triggers to flag cases that are likely to be long term or would benefit from earlier intervention. Use of a clinical case management service to support the employee and provide advice to make proactive business decisions is also recommended.

As yet case law on this issue has not developed, but an inadequate record of absences is unlikely to be an excuse for failures in disclosure.

Whichever way you look at it, fair and consistent treatment of all cases is wise to improve insurance premiums and to reduce the risk of litigation. Proactively managing absence is positive for employer and employee.

Charles Alberts is head of health management at Aon

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