Hidden Costs to a Company

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Hidden Costs to a Company

Hidden Costs to a Company

The majority of costs to a company are not obvious. The hidden and indirect costs of allowing disruptive behaviors in the workplace are very high. They include the following:

Decreased Productivity

Anyone who has experienced challenging behaviors at work can tell you how it affects their ability to produce. As a rule of thumb, a 40-hour per week position averages 30 hours per week of direct service to the company after factoring in:

  1. Vacations
  2. Sick leave
  3. Meetings
  4. Holidays

If a person earning $50,000/year loses one hour of productivity per day, the annual cost to the company in lost wages and benefits is over $9,000.


Oppressive work conditions can increase the instances of both sick leave and FMLA. A recent Finnish study showed that these conditions can increase sickness by over 26% (Kivimakia, M., Elovainiob, M., Vahterac, J. Workplace bullying and sickness absence in hospital staff. Occup. Environ. Med . 2000;57:656-660 doi:10.1136/oem.57.10.656 http://oem.bmj.com/content/57/10/656.full Accessed January 19, 2012). This is easy to understand because these conditions:

  1. Cause direct stress.
  2. Cause a decrease in a person's immune system making them more prone to disease.
  3. Justify "mental health days."

Over 20 years ago the National Institute of Occupational Safety Health (NIOSH) measured the cost of FMLA due to stress among the workforce at $19 billion per year (Sauter, S.L., Murphy, L.R., Hurrell, J. Prevention of work-related psychological disorders: A national strategy proposed by the National Institute for Occupational Safety and Health (NIOSH). American Psychologist 1990;45(10)1146-1158).

Replacement Costs

As noted earlier in this lesson, the cost of replacing and training new hires at lower levels runs from 30% to 100% of the employee's annual salary, and can be up to 300% of the annual salary, depending on the position. Additional costs of attrition include:

  1. The loss of institutional knowledge (head knowledge) that went with the departing employee.
  2. The loss of productivity between the time the person left and the time another person is trained into the position.
  3. The decrease in the morale of other employees because of the loss of that person.
  4. Additional stress on management and staff who have to fill in for the empty position.
  5. Any overtime expenses required to make up for that missing person's work.
  6. Litigation costs should an employee bring a suit against the company.

The indirect costs for a $60,000 per year employee are estimated to average a little over $100,000.

Image and Revenue

Sour people produce sour customers. As consumers, we have all had experiences with sour people. Some of these experiences may include:

  1. Doing business with service personnel who were angry or rude.
  2. Encountering people who clearly did not want to be at work.
  3. Overhearing workers complain about work conditions or other workers.
  4. Watching non-verbal signs that the person feels burdened when asked for assistance.

This sour mood affects the customers and discourages them from purchasing products and returning to the store. The behavior of employees directly impacts sales and customer base.