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There is another way to do it. About 3 months ago we implemented a system where we put stacks at all seats. If a player isn't there, we put a RESERVE button in front of the stack. When the BB reaches that stack, we remove a SB and BB from the stack and put it out of play. That seat is not dealt cards, so no player gets the advantage of the dealer position automatically. The BB simply goes to the next seat. When a player shows, he draws from one of the stacks and gets that stack and assumes that position. He receives cards the next hand, unless he happens to come when the BB has passed and the SB is behind him, in which case he sits out that hand, then receives cards as the DEALER the next hand. That's one hand in an orbit. No one is disadvantaged by this, and no player has an advantage by that player being missing. Further, it does penalize tardiness.
Consider this: If I'm 2 seats to the right of a late player, every time that player is the BB, assuming no raises in front of me, it makes sense to raise. Even if the SB calls, I might be only against 1 player. I can ALWAYS steal the BB if no one else calls. I as in me -- the same person every time. That's a big advantage, but it's not randomly spread throughout the table. It falls in the same sequence every orbit. And there will be someone 2 places to an absent player's right.
Just be consistent.