The Cost of Disengaged Employees to Businesses

The Cost of Disengaged Employees to Businesses
Published Jan 05, 2021

An engaged employee is excited to do their job. They like their workplace, colleagues and assignments. They’re always looking for ways to improve and help make the company they work for better. In 2020, an engagement survey from Gallup found that 36% of employees reported feeling engaged at work. That leaves around 64% of workers who aren’t engaged or are actively disengaged from their work and employers.

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Employees who aren’t engaged are disconnected from their work. They come in and do their jobs but they don’t try to make things better and might not be interested in growth. Employees who are actively disengaged will likely be miserable and unhappy. They might even try to make the people they work with feel miserable and unhappy, too.

Disengaged employees strain their team members and can drain a company’s resources. Calculating the cost of employee disengagement can help your company see the importance of keeping your team happy and interested in the work they’re doing.

Direct Employee Disengagement Costs to Employers

Disengaged employees can directly affect your company’s bottom line. When workers do the bare minimum or less work than they should be, your company’s output, revenue and profits will likely drop.

Lost Productivity

An employee who loves their job will come into the office or power up their workstation each day ready to take on the world and their assigned tasks. Companies with a lot of engaged employees will likely see higher productivity numbers than those that don’t. The reason for that is simple. When employees feel their needs are taken care of — and they feel supported at work — they are more likely to put in the effort required to accomplish their tasks.

They might work more quickly and have fewer distractions compared to employees who either don’t care about their jobs or actively dislike their job and employer.

How much does employee disengagement cost regarding productivity? In terms of dollars and cents, a disengaged employee can cost their employer $3,400 in lost or reduced productivity for every $10,000 in salary. That means an employee who earns $40,000 per year — about the median annual salary for all occupations — costs their employer around $13,600 in lost productivity.

Disengaged employees cost their companies a significant amount of money, which could be better served in other areas of your business. Increasing engagement among your employees can mean direct cost savings to your company and a bump in your productivity, often around 18%.

Lower Profitability

Companies with engaged employees tend to have profits 21% higher than businesses with disengaged workers. There are a few reasons why disengagement among employees costs businesses. Disengaged individuals are less productive, which affects a company’s overall output. Employees who are actively disengaged might even engage in behaviors that directly sabotage the business.

For example, they might steal from the inventory or take home office supplies, increasing a company’s costs. They are also more likely to show up late to work or call out entirely, which can lower a company’s profit margins.

When your employees feel valued by your company, your organization’s value will likely increase in tandem.

Low Employee Engagement and Low Company Performance

Among the effects of employee disengagement on a company is reduced company performance. Employees who aren’t actively engaged in their work or who outright dislike the company they work for can affect the enterprise’s performance in several ways, leading to higher costs.

High Absenteeism

During the average workweek, 2.8% of full-time employed workers are absent from the job for numerous reasons — from being sick to taking care of their children. Absenteeism occurs when employees miss work but don’t have a valid reason for doing so. They simply fail to show up and might be absent from work repeatedly. Companies with low levels of employee engagement tend to have high levels of absenteeism.

High absenteeism costs a company financially and emotionally. It can affect overall employee morale. Co-workers will likely become frustrated when one of their colleagues regularly skips work or misses important meetings. They might become disengaged themselves, adopting an “If you can’t beat ’em, join ’em” mentality.

From a financial perspective, absenteeism can lead to lower productivity, which can facilitate lower profits. Your team can’t work as effectively and efficiently as possible when people are missing or not doing their jobs. Part of increasing engagement should involve finding ways to encourage people to come to work as scheduled and on time. In some cases, reducing absenteeism can be as simple as tracking employee attendance.

Presenteeism

Presenteeism has some things in common with absenteeism, except it involves the employee showing up to work. Once they are on the job, though, they aren’t doing much of anything. In some cases, presenteeism occurs for a legitimate reason. A person might have a chronic illness that makes it hard for them to perform their tasks and responsibilities, even if they are physically present in the office.

Presenteeism can also occur when employees disengage from their work. They come into the office, but they are less productive than before. Or, they’re disinterested in their work and spend the day on social media or browsing the internet. Having employees who are present but not invested in their work costs your business in the form of lower productivity, decreased morale and potentially lost clients.

An employee who’s simply existing in the office might not be connecting with their clients as much as before, which can lead those clients to seek similar products or services elsewhere.

All in all, presenteeism costs businesses in the U.S. more than $150 billion annually. Taking steps to increase engagement within employees and get them invested in the work they do can lower presenteeism rates and save your company money.

Damage to Your Company’s Reputation

Another way that low employee engagement affects your company’s performance is reputational damage. While not every disengaged employee says bad things or spreads rumors about their employer, some do. Depending on the level of influence a disengaged employee has, the damage caused by their gossip can be high. It can cost your company in the form of lost business and clients, and you might see a high employee turnover.

One way to reduce the cost of damage to your company’s reputation is to give your employees an opportunity to voice any concerns with their supervisors or enable them to share concerns anonymously. When employees feel they have a sounding board, they are less likely to air their grievances with the public.

Turnover Costs Due to Disengaged Employees

Employees who love their jobs and feel engaged by the work they do are less likely to leave the company and find new employment. Companies with disengaged employees tend to have higher turnover rates than businesses with engaged workers.

High turnover rates can cost your company in multiple ways. You can encounter expenses associated with the drop in productivity when a staff member leaves and isn’t immediately replaced. Soft costs, which include lowered productivity, make up 67% of the total cost of employee turnover. The other 33% comes from the expense of recruiting new team members, including conducting interviews and running background checks. The cost of replacing one employee can be between 50% and 67% of their annual salary.

Making your organization a place where employees can grow and thrive will encourage them to stick around, lowering your hiring costs. When employees are committed to your company, they will be engaged on the job, which can help keep your other expenses down, too.


XL.net Can Help Boost Your Employees’ Engagement

If disengaged employees are costing your company in the form of lower profitability, reduced productivity or increased turnover, XL.net’s Engagement Alignment Plan (EAP) can help. With EAP, your business works with a dedicated engagement analyst, who will create a plan based on your company’s unique needs. The analyst will check in with your business monthly to track progress and make adjustments as needed. Since no two businesses are exactly alike, no two EAPs will be alike.

If you’re ready to increase your profitability and productivity while successfully appealing to your workers, contact us today to get started with your EAP.

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