The Actual Cost of Stress and Burnout

Introduction

There are many reasons to prioritize the well-being of your employees. Overall, happier and satisfied employees are more productive, feel more engaged, and are more inclined to stay at your company [1]. The importance of employee well-being is sometimes neglected by management. In addition to less happy employees and a decrease and a worse company culture, the costs can reach exponential heights as well. Replacing an employee leaving your company can cost up to €96,500.

In this article, we will dive deeper into the impact on the bottom line of your business by diving deeper into the hidden costs behind this number while also proposing new ways to create a workplace that lets your employees thrive.

The Effect of Stress on Employee Productivity

Employee stress and burnout, characterized by feelings of exhaustion, detachment from work, and reduced professional efficacy, are important contributors to employee disengagement. This disengagement does not only lead to less satisfied employees; it triggers a chain reaction with severe consequences for your business [2].

Stress in the workplace leads to reduced focus, increased mistakes, and higher completion time of tasks, leading to lower productivity in organisations where employee stress and burnout are prevalent [3]. The impact of stress and burnout on employees is high. People that feel stressed or burned out are up to 20% less productive than their happier counterparts. In an environment where productivity is a key factor in how a business is doing, not taking care of employee well-being does take a financial toll [4].

On top of that, disengagement from work fuels employee absenteeism. Stressed employees are more likely to experience health-related issues, both physical and mental, necessitating sick days and leaves of absence. This is the case for both short- and long-term absences.

The Financial Toll of Stress on Businesses

Annually, lost productivity due to depression and anxiety disorders costs the global economy $1 trillion [5]. This number is so high that it's sometimes hard to grasp what the effects are in your own company when it comes to burnout and stress.

In Europe, absenteeism due to illness has been on the rise over the past decade, with stress and workload accounting for a significant portion of sick leave cases. An annual national working conditions survey showed that in 2019 about 1.3 million employees suffered from burnout complaints. On top of that, 37% of employees on sick leave indicated stress and workoad as the main reasons for their absence [6].

Addressing burnout and other types of work-related stress is not just a matter of business responsibility but also makes a lot of economic sense. Preventing instead of curing can save companies a lot of money [7].

Burnout is a persistent feeling of physical and emotional exhaustion that frequently comes with pessimism and disengagement from work, and both employees and entrepreneurs may face large monetary and non-monetary costs as a result [8]. This is a widespread issue. A recent study in The Netherlands, 1 on 4 employees of the age between 18 and 24 years old reported to experience signs of burnout. [9] This high number really underscores the significance of the problem. To understand what these numbers actually mean, we will dive deeper into a case highlighting the costs of employee stress that are sometimes hidden.

Sophie's Story

Meet Sophie, a dedicated 30-year-old project manager in your 100-people company. Sophie has been working at your company for a few years and has an annual salary of €50,000. She is one of the top performers in your company. Over the past year, however, Sophie’s work life has taken a harsh turn. Sophie’s been wrestling with stress due to tight deadlines, overwhelming workloads, and a lack of support from management. As Sophie's health worsens, she faces a painful dilemma, acknowledging that she can't continue at this pace without further compromising her well-being.

The costs of Sophie's Departure

1. Turnover Cost: Replacing an experienced project manager like Sophie is no simple task. It is commonly estimated that replacing an employee of Sophie's caliber could cost up to 1.75 times her annual salary, in line with industry standards[10].
2. Cost to Replace Sophie = €50,000 (annual salary) x 1.75 = €87,500
3. The Broader Turnover Impact: Sophie's departure initiates a chain reaction, requiring the hiring of her replacement. Burnout often leads to disengaged employees, who cost their employers 34% of their annual salary as a result[10].
4. Hidden Cost of Reduced Productivity for Sophie's Case:
5. Cost of Reduced Productivity for Sophie = 18% of Sophie's annual salary = 18% of €50,000 = €9,000
6. So, the estimated total financial impact of Sophie's departure, considering both her turnover cost and the hidden cost of reduced productivity, is €87,500 (turnover cost) + €9,000 (hidden cost) = €96,500.

Sadly, Sophie’s story is not an isolated case. Research suggests that 25% of your workforce, deals with stress-related symptoms. [11]

Uncovering the Root Causes of Stress and Burnout

It's evident that stress has a substantial financial toll on companies. To delve deeper into the actual costs of stress and burnout, we must examine their origins. Factors like unrealistic deadlines, excessive overtime, and inadequate support from management can severely impact work ethics and overall employee well-being. Maybe, you feel like you have a clear idea on what is happening in your organization regarding well-being. But, what if there are signs that you would be able to spot earlier on?

According to a global survey conducted by McKinsey in 2022, nearly 15,000 employees and 1,000 HR decision-makers in 15 countries were surveyed [12]. This survey revealed a significant disconnect between employees and employers in addressing mental health needs, a trend that has become more apparent since the start of the pandemic [12]. It seems that employees and employers are not able to align with each other on their needs and what a good working environment entails.

Traditionally, companies have attempted to manage these issues through employee surveys, but they often fail to capture the full spectrum of employees' experiences. Maybe, you feel like you have a clear idea on what is happening in your organization regarding well-being. But, what if there are signs that you would be able to spot earlier on? Implementing effective health programs can lead to cost savings of 25%[11]. There is no magic formula or tool for fixing employee burnout, and anyone who tells you otherwise is trying to sell you something [7].

Why Noon?

In the context of addressing the substantial costs associated with employee stress and burnout, Noon becomes a valuable ally for your organisation. With seamless integration into platforms like Slack, Noon enables teams to consistently assess their work experiences. This data-driven approach empowers teams with actionable insights to identify and address the organizational causes of stress that impact performance.

Whether your teams work in the office, follow a hybrid model, or operate remotely, Noon provides the tools to reduce stress-related costs. Companies that are experiencing a mismatch in their workload get the tool they need to improve their team's stress level which ultimately impacts overall team performance. By evaluating on a weekly basis, Noon establishes a continuous improvement cycle that not only enhances well-being but also contributes to saving cost over time. By investing in Noon, you're investing in a healthier, more financially efficient workplace. Explore Noon today to see how it can help you reduce the financial toll of stress on your organization.

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