Tagged: costs to businesses

The financial costs of workplace bullying to businesses and targets

Colleagues in front of their office,

Workplace bullying is bad for business; it leads to decreased productivity, lower morale, increased absenteeism, and attrition.

Workplace bullying, by definition, happens at work. It interferes with the target’s confidence that her or his livelihood is assured. Broad societal economic crises threaten millions of workers at the same time and impersonally. Bullying is a laser-focused, personalized economic crisis affecting the target and her or his family. When bullies have control over the targets’ livelihood (as in 72% of situations), they have tremendous leverage to cause financial pain. Single parent workers are the most vulnerable.

Economic harms to businesses

Keeping a bully on staff is the equivalent of burning a big pile of money in the back of your building. But how much does it cost, exactly? The Workplace Bullying Institute (WBI) explains the hidden and not-so-hidden costs of allowing bullying in the workplace.

A simple formula for calculating costs

Turnover: Combined salaries of departed workers x 1.5
Opportunity lost: Lost revenue
Absenteeism: Number of missed hours x hourly rate
Presenteeism: Total salaries of checked out workers/2
Legal defense: Varies
Workers comp: Varies

For an employee paid $50,000 annually, the grand total could look like:

Turnover: $75,000
Opportunity lost: $30,000
Absenteeism: $250
Presenteeism: $50,000
Legal defense: $30,000
Workers comp: $2,000

TOTAL: $187,250

An employer could pay a productive employee for three years instead of allowing the bullying to happen. Is pretending the bullying isn’t happening really the easy way out?

How to calculate the effect on your bottom line

Step 1: Determine who was targeted and for how long. Record the time period and all of the people involved with the bullying (both direct targets and those who witnessed the bullying).

Step 2: Calculate all costs involved:

  • Turnover. Replacing top notch employees (those most often bullied in the job) costs money. “Turnover costs include employer contributions to COBRA insurance for the departed worker, expenses to announce the job opening, headhunter/recruiting firm fees to recruit worthy candidates, time spent by managers and staff to meet all candidates at meetings while getting no work done, hiring bonuses/incentives, moving expenses (?), and the harder-to-calculate lost production during the entire process that must be made up by coworkers,” according to the WBI website. To determine these costs, simply multiply the combined salaries of departed workers by 1.5 (a low-ball estimate). For example, for each target earning a $50,000 salary, the recruit and replace expenses are $75,000.
  • Lost opportunity. Bullying targets pose a threat to their bullies through jealousy. Those talented targets have value. When targets leave, the company loses. “For instance, if that person was responsible for 5 clients that produced $1.4 million in revenue, that account and that money is lost to the employer,” says the WBI website. Add in all lost revenue.
  • Absenteeism. Targets tend to stay away from work to preserve their mental health. They often use their paid time off (sick leave, vacations, and holidays) to do so. Add the number of hours per day targets and others miss work and multiply by the hourly rate. (For salaried exempt workers, divide the annual salary by 2020 to find the hourly rate of pay.)
  • Presenteeism. Presenteeism describes employees coming to work sick to avoid reprimand for being out. While coming into work sick is difficult to attribute cost to, employees can make others sick or simply not add value to companies anymore by becoming disengaged. The disengagement can rub off on others and create a whole staff of checked out employees. Add up the salaries of the checked out employees and cut that number in half. That’s about how much the business loses to by paying unproductive employees.
  • Litigation and settlements. Though there aren’t laws in Massachusetts to protect employees from workplace bullying, targets can still sue. And the business will still have to pay to respond, especially if there’s a discrimination claim.
    • If the legal defense involves internal staff, multiply their hourly fees by the number of hours spent on the case.
    • If the defense involves arbitration, multiply the hourly costs for all managers involved by the number of hours spent on the case.
    • If the defense involves outside legal help, add on $30,000 per lawsuit. Make it $60,000 if the case goes to court. That’s conservative.
    • If you settle to avoid huge legal costs, add on $30,000 at least.
  • Workers comp and disability insurance claims. When you have a workers comp claim, your insurance costs go up. Add on more costs if you need to investigate the validity of a claim.

Step 3: If you’re the employer, hold the bully accountable. Talk to the bully and begin the warning process with the ultimate goal of termination if the behavior does not change.

If you’re the target, take the total estimate with cost breakdown to the highest-ranking employee you can find who does not side with the bully, who cares about the bottom line, and is honest. Ask that person for a 15 minute meeting to share ways to significantly cut costs. Present your value to the company. Attribute the losses to the bully. Ask that they be punished and that you be put in a safe position with no loss of pay or status. If you do not get your needs met, leave. “You were too good of an employee to have given your talent for so long only to be dealt with as you have been. Leave with your head held high. Your departure is their loss,” says the WBI website.

Economic harms to individuals

Controlling bullies can block transfers to a safe job, can make targets so miserable that they quit (constructive discharge), or impair target health to the extent they have to quit to stop the stress from campaign of interpersonal destruction. In the U.S., losing work means losing health insurance. No job. Get sicker. Lose the ability to seek medical help.

  • Lost ability to be left alone to do the once-“loved job”
  • Forced to transfer from loved job, often a punitive transfer (13%)
  • Constructively discharged without reasonable cause (24%)
  • Target quits to reverse decline in health and sanity (40%)

(from the Workplace Bullying Institute)

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