Stress increases absenteeism and turnover while at the same time reducing the productivity of individual team members. The Sainsbury Centre for Mental Health, conducted a study that found depression, anxiety and stress costs employers €1,220 per year:
32.4% due to absenteeism,
58.4% is due to presenteeism,
Presenteeism can extend beyond simply coming in early and staying late, it can also manifest in team members not taking necessary time off when they are sick. This makes presenteeism very hard to detect and yet it accounts for almost 60% of the lost production per team member per year, the final 9.2% is down to staff turnover.
Calculating the cost of workplace stress
Employers have a legal and moral responsibility to minimise the risks towards workers’ health and safety, this is European law, this is moral law, and this must necessarily include psychosocial risks. Unfortunately, the psychosocial aspects of workplace health and safety are often overlooked.
There is a rumour that a focusing on psychosocial issues is challenging and expensive. In fact, failure to handle these risks are more costly. The financial consequences of workplace stress and psychological hazards are a decay in productivity, increased absenteeism and accelerated team member turnover.
There are five areas where work-related stress could drain organisational resources:
1. Sickness absence: The average percentage of absences attributable to stress is between 60% and 30%. The average cost of sickness-related absenteeism per team member, per year is €774 per team member. For example, if an organisation has a thousand team members, that’s up to €464,400 each year. In just three years it could cost this company €1.4M in sickness absence costs.
€774 x (EA) = C
[E=number of team members | A=Absenteeism %]
2. Presenteeism: The estimated cost of stress-related presenteeism is €704 per team member per year. That means that presenteeism costs a company with a thousand team members and estimated €704,000 per year. In just three years it could cost a company €2.1M in presenteeism.
€704 x E = C
3. Turnover: the costs associated with stress-related staff turnover is calculated in much the same way as the cost of sickness absence. First, we want to know the percentage of staff turnover that is specifically related to stress. On average, 19% of turnover is stress related.
The next step will be figuring out how much it costs to replace a team member, on average, this is €6,744 in total.
Complete the calculation by multiplying the results from the previous two steps and multiplying that by the number of team members in the organisation who have left.
For example, imagine a disaster scenario where 10 good people, decide to leave your company. All within one week. In this situation the costs of stress-related staff turnover would be 0.19 × (6744 × 10) = €12,813.
S(RP) = C
[S= Stress-related turnover percentage | R= Employee replacement cost | P= People to replace]
The friction cost method allows you to measure the cost of absenteeism in isolation, contextualising the impact on the organisation. The period between the initial effects of absenteeism and productivity returning back to normal is known as the Friction Period. The assumption is that the losses in productivity are localised around the time that the team member is absent as well as during the time required for the new team member to catch up to the predecessor’s prior level of productivity. The drawback to using this approach is that it does not account for instances when team members are absent without being replaced or times when their work is redistributed to others.
Presenteeism is much harder to measure than absenteeism. Presenteeism can be defined as a drop in performance as a direct result of a physical or psychological problem. A team member chooses to attend work and perform below their potential instead of taking the time to recover.
Although presenteeism gets less attention than absenteeism, the costs associated with presenteeism are many times greater than those attributable to absenteeism. It is not easy to accurately calculate how much presenteeism is occurring in your workplace. It is even harder to quantify lost productivity in a reliable way.