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I have been to UK on a skilled worker route for almost 3 years now. After one more year and 11 months i will be eligible for applying ILR application. One thing i wanted to know since these last three years i have been in and out of the UK for almost 120 days every year in intervals of 40 days each trip in a period of 1 year due to family issues and ensured count doesn’t go beyond the limit of 180 in any 12 months. The question i have is my employer doesn’t know that i have been outside the UK and worked from there during that time. Does it effect during ILR application? Is absence letter needed now? What documents and format employer should provide?

I would be more worried about your employer losing their license before you get anywhere near ILR. If your employer is so clueless that they don’t even know you are not in the U.K. and that you are spending more than 30 days outside the U.K. at any one time then they are very much in danger of losing their licence. There is also the genuine vacancy issue, you are plainly not required to be in the U.K. to perform your role.
As for absence letters - not required from an employer unless it is to explain work related absences that would contribute to going over any threshold period of absence.