Costs of an Unhealthy Corporate Culture

Numerous research studies have investigated the cost of an unhealthy workplace on the Canada, and more specifically the cost to Canadian companies5, 8. These costs not only impact employee health, but have a tremendous impact on your company’s performance. Figure 3 outlines health factors that can be exasperated by an unhealthy work place5.The increased rates seen in figure 3 will directly increase your company’s expenditure on factors such as:

  • Increased Benefits
  • Increased Disability Claims
  • Increased Presenteeism
  • Increased Absenteeism
  • Organization Social Profile.
  • Legal Responsibility

Image 3

Figure 3.

Benefits

In 2011, benefits accounted for 10.5% of Canadian company’s expenses 8.  This is an upward trend that is continuing to grow, from 2009 to 2011 benefit premiums increased by almost 4%. Additionally, the average annual premium per employee in the North America is $4,82416. These statistics highlight the importance of companies to understand and quantify what an investment into employee health and wellness represents. In doing so, companies will ensure employee needs and company health related problems are addressed. This allows for the maximization of employee productivity, and minimizes expenses.

Disability Claims

graph

Health related disability claims can have a tremendous impact on company expenses. A study by Watson Wyatt Worldwide (2005) revealed that short and long term disability claims cost Canadian employer’s $33 billion8.   The top two are musculoskeletal (e.g., back injuries) and mental health related claims.

Absenteeism

Absenteeism refers to any time employees are not present at the workplace, and can occur from person illness/injury, family related illness/injury, and/or personal days. In 2001, the estimated cost of absenteeism to employers in Canada was $5.48 billion/year9. These costs account for 15-20% of an employer’s total expenses, and 2-3 times higher than medical or drug claims. Additionally, the estimated indirect costs of replacing an absent employee can be up to 3 times higher than the direct cost8.  Indirect costs such as, administrative cost for finding replacement, reductions in productivity, morale and customer satisfaction all play a role in total cost to absenteeism.

Presenteeism

Presenteeism is a relatively new phenomenon that exists when an employee is physically at work but not fully productive due to physical or mental health conditions such as: stress related to job and/or personal lifestyle (e.g., finances, family dynamics), illness, or injury 17, 35. Emmanuel Gaudette, Manager for Standard Life suggested that we are currently at a similar stage with understanding the impacts of presenteeism today, that we were in in the 1960’s with workplace health and safety8.  Moreover, a recent study estimated presenteeism can be up 7.5 times more costly then absenteeism with an estimated cost of $20 to $30 billion, to Canadian employers10. Finally, a US study, estimated the cost of decreased productivity related to personal or family health problems is $1,685/ employee/ year and a total annual cost of $225.8 billion annually30.

Organization Social Profile

An organization’s social profile refers to how a company cares for and invests in its’ employees, community and environment. A survey done by Sanofi Canada (2011), found 67% of Canadian workers viewed a comprehensive health and wellness plan as a sign that the company cares about them. Additionally, 52% of employees say their company does not do enough to promote employee health8. These statistics highlight the importance of a “company with a conscious” to today’s workforce in Canada. Finally, an organization’s social profile or reputation can have a large impact on the retention of its’ employees. Research has estimated the cost of replacing an employee can be upwards of 150% of that employee’s salary, depending on job classification and level of seniority3. Yet only 21% of Canadian employers track turnover statistics.

Legal Responsibility

Employee care and healthy working conditions is no longer a recommendation but a legal requirement for Canadian companies. The Judges Tribunal of Canada states it is mandatory for an employer to create a civil, respectful, and supportive working environment. Unhealthy working conditions can cause mental health issues such as depression, anxiety and burnout in addition to physical harms27. In the last 5 years within Canada there have been multiple legal lawsuits awarding employees upwards of $1 million dollars in damages from mental and physical stress within the workplace5.