Counting the real costs of poor stress management for your business

‘Stress is a killer’, that’s what we’re all being told. As the impact of stress on people’s mental and physical health becomes more evident, people are increasingly worried as to where it might lurk, with more and more remedial interventions being suggested and the market for stress-management products growing exponentially. On the face of it, this is not a surprise, as the costs of unmanaged stress for the individual can be dire – increasing the risk of anxiety and depression, impacting cardiovascular health, and even shortening life span. The focus on stress has been most keenly felt in the workplace as more and more businesses are prioritising the effective management of employee stress. But do we know how, when or why this ‘killer’ is acting on the health of an organisation? There’s no doubt workplace stress is a major threat to businesses as it generates spiralling costs that significantly tighten profit margins and dampen financial gain. These costs are manifested in three critical areas of the employee experience: sickness absence, presenteeism and staff turnover. Economic research and government figures show presenteeism, absences and staff turnover due to stress are all increasing drastically, but few organisations are aware of just how badly they impact their bottom line.

Let’s take a look at how each of these three areas is hampering business productivity…

Stress-related sickness absence

One of the ways work-related stress can cause significant costs to a business is by increasing sickness absences taken by employees. According to the ONS, the UK saw an increase in sickness leave during 2021 – coinciding with worsening rates of workplace stress alongside the Covid-19 pandemic. A clinical study looking at employees aged 18 to 64 found the odds of registering absent are twice as high for employees who report experiencing high stress. Just as worrying, the HSE’s 2021 report found that 50% of all sickness absences were due to work-related stress, depression or anxiety. Sickness absence costs are not just related to the wages you pay when someone is not working, but also include the cost of cover – whether that be additional staff or the impact of existing staff doing more – and the management time associated with putting that cover into place. Overall productivity can also be negatively affected and there can be impacts on customers too, limiting sales and satisfaction. Taking these elements into account, the Institute of Economic Studies carried out an extensive research study in 2001 which estimated the average cost per day per worker of sickness absence as £1,074, meaning that for an organization of 1,000 employees with today’s average rate of sickness absence would expect the cost of such absence to be almost £5.5m. Given the rise in wages in the ensuing 20 years, this cost is likely to be a significant underestimation.

Presenteeism

Although the term might be new to you, presenteeism represents a rising issue in workplace culture. It refers to the act of showing up to work even when sick and/or feeling unwell. Essentially, it is the opposite of absenteeism. Although it might be mistaken as an act of commitment, presenteeism is a major source of decreased productivity and can have long-term effects which may include burnout. Worryingly, a report by the CIPD finds that presenteeism has more than tripled since 2010. Being at work when you are operating at reduced capacity is linked to employee disengagement and stress which can start a vicious cycle of absence and pressure to catch up. Indeed, both presenteeism and absenteeism tend to coincide – although toxic work environments increase the frequency of presenteeism. The effect of disengaged employees on productivity is enormous, Gallup estimates it can cost an organization around £3,200 for every £10,000 of salary. In an economic research study to investigate the cost of presenteeism in 2018, the average lost productivity cost was estimated to be £4,059 per worker per year. For a workforce of 1,000, that represents over £4m.

Cost of staff turnover

Losing employees is an inevitable bump in the road, but very few businesses are aware of the significant costs it triggers. Staff turnover costs are felt in multiple ways. Firstly, the business needs to spend out on the agency/advertising cost to rehire an employee and secondly must train them up to the optimum productivity of the previous employee. As well as these costs, during this process, revenue is also lost when compared to the situation before the worker left. On average this process takes around six months for a mid-level manager. Losing an employee to stress clearly damages profits over a far longer time period than might be expected. Workplace stress is a significant predictor of staff turnover, and this may become more relevant as younger workers prioritise working for companies that support mental health. In their groundbreaking work in 2014, Oxford Economics investigated the staff turnover costs of 561 UK businesses and estimated the average cost of staff turnover to be £31,364.12 For a business with 1,000 employees, based on a conservative estimate of voluntary staff turnover at 9.5% per year, this equates to just under £3m.

Conclusion

Understanding the cost of stress for your business can be the first step in contextualising its magnitude and so recognising the enormous commercial impact of tackling the issue. It would be invaluable to be able to compare these with the costs of workplace stress management interventions in order to evaluate their ROI. Using the BIOStress cost calculator will help you work out just how much workplace stress is costing your business and see how our revolutionary BIO programme, including objective data collection, intervention and optimisation delivers tailored strategies to cost-effectively address stress management in your organisation.