The real cost of disengaged employees [FREE ROI calculator below]

Have you ever wondered how much a disengaged employee is costing your business?

Disengaged employees cost the UK economy a staggering £340 billion a year. This is an accumulation of productivity, recruitment spend and so much more. 

Poor engagement can:

• Impact employee productivity

• Cause you to lose your best talent

• Stop you from attracting top talent

On the flip side, an engaged workforce has many benefits. Engaged employees are 21% more productive than their peers and are 87% less likely to leave their current employer. Of course, this requires investment and careful planning. 

In this blog we will show you the real world cost of disengaged employees within your organisation and the benefits an engaged workforce will bring. 

The subjects covered will be: 

• The real cost of employee engagement 

• Areas employee engagement can impact your business

• Benefits of having engaged employees

• Employee engagement ROI calculator

The real cost of employee engagement 

A disengaged employee costs an estimated 18% of their annual salary. For example, one disengaged worker on an average salary of £30,000 will cost you £5,400. 

This begs the question of whether cutting your engagement tools will cost you far more than it saves. 

You have to approach the matter of employee engagement with caution. 

Areas employee engagement can impact your business

Employees are the heart and soul of any business. Naturally, their connection to the business has a significant bearing on the bottom-line . What many businesses grapple with is the ROI of employee engagement strategies and enablers. 

How can you focus your strategy on demonstrating the financial benefits? These are the areas of the business impacted by employee engagement and their ROI. 

Employee productivity

A team of engaged employees are proven to be 21% more profitable than teams who aren't. The link between employee engagement and extra productivity is hard to deny. 

Based on the findings of the Gallup study, if you have ten engaged teams, you gain the equivalent of another in productivity! By increasing output to this extent you can easily justify investment into employee engagement.

Employee retention

Employee engagement strategy is vital to keeping hold of your talent. According to Gallup, highly engaged businesses enjoy 59% less turnover. When an employee is disengaged they have far less reason to stay or show any loyalty.

Engaged employees care about their work, as well as being more proactive in finding solutions to problems. They will be motivated beyond their paycheck and there will be less concern about losing talent to another organisation.

The ROI of employee engagement will be demonstrable through its direct impact on turnover and the associated costs. 

Employee turnover 

When calculating employee turnover, you must factor in the cost of exit, recruitment cost, replacement cost and lost productivity. Due to its complexity, several estimations exist as to how much turnover actually costs.

However, Centre for American Progress (CAP) found that turnover generally costs:

• 16% of those earning less than $30,000 (£23,000) per annum 

• 20% of those earning between $30,000- $49,999 (£37,000) per annum

• Up to 213% of annual salary for executive positions or $50,000+ per annum 

These figures will (or at least should) make you sit up and take notice. However, the most engaged teams are found to have 59% less turnover. Cost savings should be considered when weighing up potential ROI. 

Employee onboarding 

Employees who have a negative onboarding experience are twice as likely to look for other career opportunities. Onboarding is absolutely key to initial engagement. First impressions are important!

Ensure your onboarding process is immersive and informative to increase the possibility of retention.

A Glassdoor study found that an employer spends an average of £3,000 and 27.5 days hiring a new employee. Poor onboarding will increase the regularity of this process.

Good onboarding will get new recruits to grips with the company and role in a timely fashion.

Employee absenteeism 

Absenteeism is when an employee is off work frequently. Several causes of absenteeism are linked to disengagement. Generally, these are work related stress, general disinterest and burnout.

A Workforce Institute study found that absenteeism costs on average 1.2% of employee salary. That’s an extra £3,600 per ten workers on a £30,000 salary. This figure will be considerably higher when disengagement is endemic in an organisation.

Mitigating disengagement will help to save money from lost days, output and stress related illness. It is reported that engaged workforces enjoy 41% less absenteeism. 

*(Salary x 0.012) x number of disengaged employees= cost of employee absenteeism

Customer satisfaction

A Gallup report found that engaged teams have 10% higher customer ratings. Engaged employees invariably provide a more pleasant customer experience projected by their mood.

This does not only apply to customer facing roles. Quality of products and services developed by engaged teams are all linked to how a consumer feels. 

A 2020 Salesforce study also found that 89% of consumers will make another purchase after a positive customer service experience. The better the customer experience, repeat custom and referrals you get. 

Benefits of having engaged employees

Engagement or lack of essentially affects every area of your business. There are also several additional and related benefits as a product of having an engaged workforce. 

Here are our top benefits linked to engaged employees:

Employee advocacy

Engaged employees not only take pride in their work but also who they work for. They are likely to become brand advocates themselves.

Those who advocate the company will talk about the business in a positive light to people they know. This reflects how the reputation of a business internally can impact how it is projected externally.

What is important here is that brand and vision are communicated clearly by the business, so there is no confusion over the message.

Increased profits 

The higher output from engagement will naturally lead to higher revenue. A Gallup study found that engaged employees result in a 23% increase in profitability. When employees want the business to succeed, they will work towards making the business better. 

It goes to show that if you invest your time and resources wisely into employee engagement you will see significant ROI in the bottom-line of your business . 

Happy employees

Although happiness and engagement are not necessarily the same, engagement can lead to happiness.

This is the human aspect to engagement. Helping your workers be happier in their lives is something a business should aspire to do, regardless of their return from it.

That being said, happier workers are still more productive than those who aren't. A study by Oxford University found that happy employees are 13% more productive.

Significantly fewer sick days taken

Thriving employees miss 53% less days as a result of health related issues. Disengaged workers are generally more stressed. This causes anxiety, depression and a host of other mental and physical illnesses. 

As a result of the stress felt by employees and subsequent illness, days will be lost. Output will suffer through absences and will have a direct impact on the bottom line of the business. 

Take that stress away and you will notice a marked difference in the number of sick days. 

More employee participation

Do you yearn for your workers to get involved in discussions and meetings more often? Effective employee engagement can help you achieve this. 

Engaged employees reduce absenteeism at work by 41%, resulting in better collaboration and more aligned workers. Given their familiarity with the business, they can offer some of the best suggestions to take it forward.  

Creative ideas can come from all types of personnel and offer innovative solutions. But that comes from them having the confidence to speak their mind. 

Employee Engagement ROI Calculator

Employee disengagement costs organisations an estimated £340 billion in the UK and an eye watering $483-$603 billion per year in the US. 

However, all the highlighted benefits of engagement mean there are also opportunities to increase revenue . 

On the basis of in-depth research, there is a way to measure your return on investment (ROI) in regards to employee engagement/disengagement. 

Our ROI calculator is designed to quantify the financial impact of disengaged employees in your business. 

This will show the true cost of disengaged employees based upon average salaries and size of the workforce. 

Please note that figures are based on research carried out by Gallup around the subject of employee engagement. Figures are estimates only. 

Access the ROI calculator here