Research Proves Employee Engagement Strategies Save Money

Engaged employees are great for your organisation, from productivity gains and general happiness, however are you aware that using employee engagement strategies can save significant amounts of money?

We’ve previously written before about the benefits of employee engagement however let’s delve even further, by looking at nine different research studies that illustrate the cost savings that can be found by engaging your employees.

We have broken these nine studies down by three main areas;

  • Recruitment costs in replacing disengaged employees
  • Costs for sick leave and absenteeism
  • Compensation costs for disengaged employees

Let’s get into the topic of how employee engagement strategies save money for clever employers.

Employee engagement reduces recruitment costs

According to this research, by increasing employees’ engagement levels, organisations can expect an increase in performance of up to 20 percentile points and an 87% reduction in employees’ probability of departure.

It makes sense that engaged employees stay with the organisation, whilst disengaged will eventually resign.

The Australian Human Resources Institute (AHRI) recently estimated that the cost of staff turnover in Australia is in the order of $20 billion. AHRI also found that staff turnover rates in Australia are on the rise. AHRI estimates the cost of replacing an employee is at least 75% of the employee’s annual salary and may be as much as 150% in some cases.

Couple that with research from JDA Professional Services Inc, which states “the direct costs of replacing an employee who makes $60,000 per year would equate to over $49,000. When added with indirect costs, you can expect that the total cost of hiring will total $150,000.“

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That’s right; having employee engagement strategies in place means you could be saving significant costs in replacing disengaged employees. For every employee that stays because they are engaged in the workplace, you are saving tens of thousands of dollars.

“ the cost of replacing an employee is at least 75% of the employee’s annual salary and may be as much as 150% in some cases”

Employee engagement reduces sick leave

The cost savings of employee engagement doesn’t stop here either; studies have shown that engaged employees take less unscheduled leave.

Research undertaken by global company, Gallup, showed that “companies in the top quartile of employee engagement see 37% lower absenteeism than companies in the bottom quartile of employee engagement.”

Another study shows “Employees who consider their workplace mentally unhealthy take four times as many sick days than those who consider their workplace mentally healthy. Creating a mentally healthy workplace generates an average return of $2.30 in improved productivity for every $1 invested.”

Meanwhile, a 2013 study of the UK civil service states “analysis shows that companies with highly engaged staff have half the levels of sickness absence and lower levels of workplace stress than companies with low levels of engagement.”

The British aren’t alone either; in the southern hemisphere a 2011 study of the Australian Public Service backed this data, by stating that “engaged employees are less likely to use their sick leave”.

“an average return of $2.30 in improved productivity for every $1 invested”

Employee engagement reduces compensation claims

In a recent report, Gallup explained how using a series of employee engagement strategies at a US-based hospital meant that “Workers’ comp claims decreased substantially. The number of workers’ compensation claims went from 18 per year in 2010 to a mere 7 per year in 2013.”

An amazing 11% reduction in costly claims in three years!

Adding to this, a study conducted for the Society of Human Resource Management determined that the average cost of a safety incident for an engaged employee is $63 versus $392 for a disengaged employee.

Employee Engagement Strategies

Image: Stock Snap


In summary, having the right employee engagement strategies will save significant costs in replacing employees, in wasted wages for sick days and unscheduled leave and in workers compensation claims.

These are just a few cost-saving benefits of employee engagement, all of which can save your organisation significant money per year. Couple these with the many benefits, such as increased profits and productivity, and it becomes glaringly obvious why business interest in effective employee engagement strategies is on the increase.

Read our article which has various employee engagement ideas that are easy to introduce for a few ideas.

Lauren Clarke

Lauren Clarke

Lauren writes for 6Q and a number of other blogs from her home office in Australia. She spends her time writing, reading and changing US to International English on many articles that she edits.