Hospitality Industry
3 min read

The high cost of low employee engagement and mental health issues

EHL Insights
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  • Low employee engagement and mental health issues lead to higher turnover rates and absenteeism in the hospitality industry and other sectors.
  • These problems cost companies dearly, impacting financial outcomes, productivity, and employee morale.
  • Employee empowerment and wellbeing-focused leadership are essential to solving these challenges and achieving sustainable success.


Nowadays, workplace wellbeing is not merely a matter of social responsibility. It's also a strategic element in companies' productivity and profitability, as it's directly related to work engagement.


But, tangibly speaking, what is the cost of low engagement and poor mental health in the workplace? There are numerous data points that demonstrate this and reinforce the significance of a wellbeing culture.


Loss of productivity: A trillion-dollar issue

According to the World Health Organization (WHO), every year, 1 trillion dollars are lost due to low levels of productivity associated with mental health issues.

The decrease in productivity isn't solely due to a general shortage of labor (although this is an issue in specific niches), but rather due to cases of reduced individual performance linked to exhaustion, stress, and other difficulties that impact mental and emotional stability.

Currently, over half of the global adult population is in the workforce. However, 15% of them experience some form of mental disorder that prevents them from maintaining a consistent level of productivity, according to the WHO.

Mental health programs for employees are a good response to this problem, but they're not sufficient. It's important to create an environment of wellbeing and a culture that balances personal and professional life.

While a mental health program helps address current challenges, a wellbeing culture acts as a powerful prevention tool.

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The cost of losing employees and seeking replacements

Why do employees quit? Among the top 10 most common reasons, according to Profile Resourcing, 5 are evidence of environments lacking wellbeing:

  1. Limited flexibility for work-life balance.
  2. Underestimation by the company.
  3. Poor work culture.
  4. Inadequate physical work environment.
  5. Environment lacking emotional stability and security.

These negative realities not only lead to financial losses due to reduced productivity levels, they also result in low work engagement that translates into losses associated with employee turnover.

According to People Keep, the cost of replacing a departing employee ranges from 16% to 213% of their annual salary.

On average, companies take 42 days to replace resigned employees. This triggers a cascade of problems:

  • High costs in recruitment processes, headhunting, and related services.
  • Increased workload for those taking on tasks and responsibilities of the departed employee.
  • Decrease in productivity due to the absence of a professional to cover a key role.
  • High costs for training the new employee.

Considering these impacts, the need for employee retention strategies and effots to improve engagement are clear. But how can this situation be reversed and the financial benefits of employee retention unlocked?

In addition to a positive work culture, achieving work engagement requires creating effective compensation packages, establishing corporate structures with growth opportunities, and building an organizational purpose that employees can connect with.


Low work engagement is contagious and expensive

Low employee engagement not only affects the individual's own productivity but can also have a detrimental impact on the morale of their colleagues.

When some team members are disengaged, it can create a negative work environment that spreads dissatisfaction.

According to a Gallup study, workgroups that have low engagement levels experience a 25% higher rate of absenteeism and 62% more accidents, leading to increased operational costs.

Additionally, disengaged employees can disrupt teamwork and hinder collaboration, decreasing overall team efficiency. This negative atmosphere can be contagious, influencing others to become disengaged as well.

Consequently, productivity dips across the entire team, and the cycle of low engagement and reduced morale continues.

Addressing employee engagement isn't solely about the individual—it's an investment in fostering a wellbeing-focused work culture that contributes to higher productivity and reduced costs.


Unmotivated employees make bad decisions

Unmotivated employees can inadvertently become catalysts for poor decision-making within a workplace, leading to detrimental outcomes such as financial losses and project failures.

Just as a ship without a captain risks veering off course, employee disengagement can result in misguided choices that disrupt the organizational compass. Statistics underscore this critical connection.

According to a study by Gallup, disengaged employees are 18% more likely to make mistakes, contributing to project delays and inefficiencies. This resembles a mechanic neglecting to tighten a critical bolt, causing the machinery to malfunction.

Additionally, a report from the Center for American Progress states that disengaged workers cost organizations approximately 34% of their annual salary due to decreased productivity.

This statistic highlights the substantial financial impact of employee disengagement on organizations, emphasizing the urgency of addressing it.

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Harmonizing purpose, wellness, and commitment as a solution

Establishing a workplace culture centered on wellbeing emerges as a paramount strategy to combat low work engagement. The intricate interplay between personal wellness and professional aspirations forms the cornerstone of a thriving and efficient organization.

To comprehensively address disengagement issues, companies should embrace a three-pronged approach: prioritizing employee empowerment and wellbeing through comprehensive wellness programs, infusing a sense of purpose that resonates deeply within the workforce, and providing robust mental health support.

These strategic pillars not only mend the existing cracks in engagement but also fortify the organization's structure, fostering a profound commitment among employees.

As this holistic approach gains traction, it not only resolves immediate disengagement challenges but also lays the groundwork for sustainable success.

To complement the information you acquired through this post, we invite you to also read the following articles, that will help you develop leadership strategies based on comprehensive wellbeing and employee engagement:

Employee Empowerment: Create an engaged and productive workforce

Cultivating a happy workplace with wellbeing-focused leadership

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“The most successful organizations are now focusing their attention on the wellbeing of their employees as a way to gain emotional, financial, and competitive advantages,"