In today’s fast-paced corporate world, especially in the wake of the pandemic, the expectation to work anywhere, anytime, has become the norm. This shift has blurred the lines between professional and personal time, often at the expense of mental well-being. As a result, employee burnout is on the rise, and the situation is growing more concerning.
There are serious effects of employee burnout, and while the emotional toll of workplace burnout is frequently discussed, the financial impact is just as critical and demands attention.
Burnout goes far beyond employee well-being, affecting everything from decreased productivity to higher turnover rates. Read on to learn more about the actual financial cost of employee burnout and what you can do about it.
The direct financial costs of employee burnout
The truth is that the effects of burnout on work performance aren’t where things stop. There’s a direct financial cost to organizations when employees are burned out, and it can be significant. High workplace burnout rates can impact employee retention, work-life balance, and overall organization morale. Burnout can decrease performance, increase absenteeism, and raise healthcare costs.
Decreased productivity and performance
One of the most prominent and immediate effects of burnout is a decline in productivity. Burned-out employees are more likely to make mistakes and miss deadlines. According to some research, they’re also more likely to produce substandard work and are 3% less confident in their performance. This loss in work productivity is an additional cost to employers.
Increased absenteeism and higher turnover rates
According to a recent Gallup poll, burned-out employees are 63% more likely to take sick leave. The cost of this increased absenteeism can be staggering, as organizations are left to fill the gap, often paying overtime or having to absorb how much doesn’t get done when someone else is filling in.
There’s also a correlation between burnout and higher employee turnover. It makes sense — employees who are burned out can become increasingly less satisfied with their jobs and be less likely to stay in a role. One Gallup study found that employees who are burned out are 2.6 times more likely to actively look for new employment.
Increased turnover adds a whole new layer to the cost of employee burnout. When employees leave, they must be replaced, which costs companies time and money. Some research suggests that every new hire can cost nearly $4,700.
Increased healthcare and benefits costs
Burnout impacts more than just work performance. It can affect physical and mental well-being and increase healthcare costs for employers. Chronic stress has been linked to multiple health issues, like cardiovascular disease, depression, anxiety, and other stress-related conditions that can be expensive to treat and manage.
The hidden indirect costs of employee burnout
While it’s easy to see and understand the direct financial impact of employee burnout, there are hidden, indirect costs that can be just as damaging. In reality, burnout often affects more than productivity, absenteeism, turnover, and health. It can slowly chip away at morale and hamper innovation. In short, the long-term challenges of burnout can hinder an organization's ability to grow.
Impact on team morale & company culture
Workplace burnout is a pressing and widespread issue for companies today. One burned-out employee can negatively impact an entire team and workplace culture. It can make it challenging to collaborate and create tension and conflict.
Additionally, manager burnout can further exacerbate issues within a team. Burned-out leaders often struggle to support their employees, leading to a breakdown in communication and morale. Over time, it can reduce trust, erode morale, and create a toxic workplace environment for everyone.
Diminished innovation and creativity
Burnout can affect thinking outside the box, creativity, and problem-solving. It can also stifle innovation since stressed employees typically only focus on immediate tasks instead of looking at the big picture or exploring new ideas. Over time, a loss of creativity can significantly impact a company, affecting its ability to stay competitive.
Business reputation
Organizations with burned-out employees can quickly earn a bad reputation, both internally and externally. High turnover rates, subpar customer service, and scathing reviews on job platforms can devastate a company’s brand image. They might even cause top talent or customers to think twice before doing business with a brand.
Solutions to prevent employee burnout
There is some good news, though. It’s possible to prevent employee burnout, and doing so is essential for maintaining a healthy, productive workplace environment. You can implement some of the following proactive strategies to create a supportive culture that values well-being and reduces the risk of burnout.
From promoting work-life balance to offering mental health resources and support, preventing burnout will allow you to sustain a thriving, engaged team.
Promoting work-life balance
Work-life balance is a hot topic today, and promoting it in your organization is an effective way to combat burnout. By addressing common causes of stress in the workplace, such as unrealistic workloads and rigid schedules, companies can take proactive steps to improve work-life balance and reduce the risk of burnout.
One of the best ways to encourage work-life balance for employees is by doing fundamental but simple and practical things, like:
- Offering flexible work arrangements
- Encouraging employees to take regular breaks
- Setting realistic expectations for workloads
- Allowing part or full-time remote work
- Offering mental health resources and mental health days
- Having unlimited PTO
Providing mental health support
Companies that invest in mental health understand how crucial it is to address and prevent burnout. When employees have access to therapy, counseling, and other mental health resources, they get the tools they need to learn how to manage employee stress before it turns into burnout.
Fostering a supportive work environment
Employees who get to work in a supportive environment every day are significantly less likely to experience burnout. Feeling valued and heard is critical in maintaining a healthy environment where employees remain engaged and motivated. You can create a supportive work environment by:
- Having open communication
- Establishing recognition programs
- Promoting a culture of inclusivity
- Offering generous personal time off, parental leave, and vacation time
The ROI of investing in adequate support
The cost of employee burnout can be daunting, but you can overcome it by turning the challenges you’re facing into opportunities. When you invest in mental health support for your organization, you will likely see significant returns.
Current research suggests that for every dollar companies spend on mental healthcare for their employees, they’ll see a $4 return based on increased productivity, reduced absenteeism, and lower employee turnover rates.
By partnering with Talkspace, you can provide employees with access to critical mental health resources to improve their mental well-being while protecting your bottom line. If you feel employee burnout is draining your organization’s culture and costing you money, take steps to invest in your team’s mental health today. You’ll see the results pay off in reduced direct costs and improved performance.
To learn more about the ROI you can achieve by investing in Talkspace, try out our mental health ROI calculator or connect with someone at Talkspace for a demo.
Sources:
- “Employers Need to Focus on Workplace Burnout: Here’s Why,” May 12. https://www.apa.org/topics/healthy-workplaces/workplace-burnout. Accessed October 13, 2024.
- Wigert, By Ben. 2023. “Employee Burnout: The Biggest Myth.” Gallup.Com, July 21. https://www.gallup.com/workplace/288539/employee-burnout-biggest-myth.aspx. Accessed October 13, 2024.
- Agrawal, By Ben Wigert Ph.D. and Sangeeta. 2024. “Employee Burnout, Part 1: The 5 Main Causes.” Gallup.Com, July 12. https://www.gallup.com/workplace/237059/employee-burnout-part-main-causes.aspx. Accessed October 13, 2024.
- Carpenter, Gabrielle. 2024. “What’s the Average Cost of Hiring a New Employee?” B2B Reviews. April 1. https://www.b2breviews.com/cost-of-hiring-a-new-employee/. Accessed October 13, 2024.
- Mariotti, Agnese. 2015. “The Effects of Chronic Stress on Health: New Insights into the Molecular Mechanisms of Brain–Body Communication.” Future Science OA 1 (3). doi:10.4155/fso.15.21. https://www.tandfonline.com/doi/full/10.4155/fso.15.21. Accessed October 13, 2024.
- The nonpartisan and objective research organization NORC at the University of Chicago. n.d. “National Safety Council and NORC at the University of Chicago Announce New Mental Health Cost Calculator to Demonstrate Why Investing in Mental Health Is Good for Business | NORC at the University of Chicago.” The Nonpartisan and Objective Research Organization NORC at the University of Chicago. https://www.norc.org/research/library/national-safety-council-and-norc-at-the-university-of-chicago-an.html#_ednref3. Accessed October 13, 2024.