Beyond making companies earn more, happy and engaged employees also help firms to significantly reduce costs.

A 2013 Gallup study estimated that actively disengaged employees cost the U.S. between $450 billion and $550 billion in lost productivity per year.

Only 3 in 10 American workers are engaged, according to this 2010-2012 study.

However unhappy employees cost companies money in a variety of ways, not limited to reduced productivity. Health is a big factor, happy employees are healthier employees. Gallup has shown that on average, employees who are engaged and thriving miss just 3.9 days of work per year, almost three times lower than the absenteeism of those who are actively disengaged and suffering who miss an average of 10.7 days of work per year:

Engagement and wellbeing have real effects on German businesses and the country's economy - a difference of 64% on the average annual per-person cost.

The American Institute of Stress found that unanticipated absenteeism is estimated to cost American companies $602.00 per worker, per year and the price tag for large employers could approach $3.5 million annually and 60% of employee absences could be traced to psychological problems that were due to job stress.

A Queens School of Business study verified this further, finding that firms with the most engaged employees have 26% lower employee turnover and 20% less absenteeism.

Happiness and stress are also inversely related. The American Psychological Association estimates that more than $500 billion is siphoned off from the U.S. economy because of workplace stress, and 550 million workdays are lost each year due to stress on the job.

Employee turnover is another significant cost to companies and happiness is key for talent retention. A Columbia University study found “that job satisfaction and employee turnover intention are inversely related”.

The U.S. Bureau of Labor Statistics has found that replacing an employee costs a business one-half to five times that employee’s annual salary. So, if 25% of a business’ workforce leaves and the average pay is $35,000, it could cost a 100-person firm between $438,000 and $4 million a year to replace employees.

As employee happiness and retention are positively correlated, the happier a firm’s employees the less that firm will be hit with these costs associated with employee turnover. Companies that prioritise making their employees happy minimise turnover, maximise talent retention, reduce absenteeism and increase productivity all of which can significantly reduce costs.

Between being more profitable, having higher share growth and having reduced costs it’s difficult to deny the argument that happier employees benefit companies financially. As we have seen the research is strong across the industry and the conclusion appears glaringly obvious – companies with happier companies are better off financially!

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About the Author

This guest blog was written by Rian Doris while an intern at Happy. Rian is a student of Philosophy at Trinity College Dublin with a passion for Positive Psychology and all things wellbeing related. After completing undergraduate studies, he is aiming to pursue a Masters in Applied Positive Psychology and then go on to do further research in the field. Contact him at riandoris@gmail.com.

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