Employee burnout leads to significant financial losses for companies

Employee burnout is likely costing companies millions of dollars each year, ranging from approximately $4,000 to $21,000 per employee in the U.S., according to a study published in the American Journal of Preventive Medicine. That means a 1,000-employee company in the U.S. would on average be losing about $5 million annually. These estimates are based on a computational simulation model developed by the Public Health Informatics, Computational, and Operations Research (PHICOR) team based at ​​the CUNY Graduate School of Public Health and Health Policy (CUNY SPH) working with researchers from Baruch College, Johns Hopkins University (JHU), and the University of San Diego (USD) Knauss School of Business.

Our model quantifies how much employee burnout is hitting the bottom line of companies and organizations. Therefore, it can give companies and organizations a better idea of how focusing more on employee well-being could help decrease costs and increase profits.”

Bruce Y. Lee, CUNY SPH professor, PHICOR and Center for Advanced Technology and Communication in Health (CATCH) executive director, and senior author of study

The computational model simulates an employee who moves through different stages ranging from active participation at work to disengagement and burnout over time depending on what stressors the employee encounters. One can specify the position of the employee (e.g., hourly non-manager, salaried non-manager, manager, or executive) and what state that employee is in initially (e.g., engaged, burned out, leave their job, overextended, disengaged, or ineffective).

As time in the simulation proceeds, the employee has probabilities of encountering different stressors that relate to the workplace (e.g., workload, community, control, rewards, fairness, and value) and non-workplace (e.g., family, cultural and psychological environment, financial, and health).The number of stressors and the type of stressors (workplace, non-workplace) that an employee experiences during a two-week period determines if the employee stays in the same state or moves to a different state. While the employee is in a given state, that employee has certain productivity levels and experiences different possible health effects.

The team then ran the model to estimate the resulting cost to an employer when different employees experience different types of disengagement and burnout at different times. For example, an hourly non-manager employee going through burnout would cost an employer on average $3,999 (95% range: $3,958-$4,299). These costs would be on average $4,257 (95% range: $4,215-$4,299) for a salaried non-manager, $10,824 (95% range: $10,700-$10,948) for a manager, and $20,683 (95% range: $20,451-$20,915) for an executive. If one were to assume that a 1000-employee company has the typical distribution by employee type (59.7% non-managerial hourly, 28.6% non-managerial salaried, 10% managers, and 1.7% executives), then the costs of employee disengagement and burnout to the employer would total $5.04 million (95% range: $5.03-$5.05 million) annually. There would also be an associated 801.7 (95% range: 801.5-801.9) quality-adjusted life years lost each year.

All of this quantifies the substantial impact that employee disengagement and burnout has on the employer’s bottom line. These costs range from 0.2-2.9 times the average cost of health insurance and 3.3-17.1 times the average cost of employee training to employers. These results also give a sense of how much employers might want to invest in preventing disengagement and burnout. There are a number of possible interventions that could reduce the risk of disengagement and burnout from companies offering mental health benefits to financial literacy programs to properly managing employee workloads. However, each of these do require financial commitments to establish and maintain.

Burnout is pervasive and it’s costing organizations millions each year. Organizational leaders need to consider how their cultures and benefits programs support the 60% of employees silently struggling with burnout.”

Molly Kern, professor at the Zicklin School of Business at Baruch College and co-author of the study