How Increasing Employee Engagement Affects Your Bottom Line

Employee engagement might sound like HR jargon, but the numbers tell a different tale. Mentally checked-out employees cost businesses $7.8 trillion annually on a worldwide basis. So, it’s clear to see that increasing employee recognition and engagement can only be good for your bottom line.

According to a Gallup poll, disengagement costs the US economy up to $550 billion every year. At the same time, McKinsey & Company research suggests that disengaged employees and the attrition that goes with it could cost a median-size S&P 500 Company $228-$355 million a year in productivity losses.

That’s just unacceptable, and it’s no surprise that employee recognition and engagement has turned into an art, a science, and an industry in its own right.

Happiness is Worth $1 Million

The Gallup State of the Global Workforce Report claimed that engaged employees are 17% more productive than unengaged employees, while highly engaged teams show 21% more profitability. In a 100-person company, boosting engagement is a simple way to add $1 million to the bottom line due to increased productivity, lower turnover, and increased customer satisfaction.

It can be hard to put precise numbers on happiness, so the best way to truly calculate the ROI of employee engagement is to look at what you can measure: productivity, absenteeism, turnover, and onboarding costs.

Automated employee recognition tools, like Motivosity, can be the bridge to creating a more engaged and fulfilled workforce. "Employee engagement isn’t just a feel-good initiative—it’s a business strategy with measurable impact. When companies invest in recognition and connection, they see real returns in productivity, retention, and overall performance,” says Scott Johnson, CEO of Motivosity. “It’s critical that businesses invest in their employee engagement strategies, ensuring every employee feels valued and motivated to contribute at their highest level. The numbers don’t lie—happier employees lead to healthier bottom lines."

Productivity

According to separate studies by Gallup and the Harvard Business Review, disengaged employees cost their company 18-34% of their annual salary.

Morale is a complex issue, but a disengaged employee can have a knock-on effect on the whole team. Highly-engaged teams, meanwhile, are 14% more productive. In the example company of 100 people, this can make a $525,000 a year difference.

Absenteeism

Checked-out employees taking sick leave for non-medical reasons cost a company $3,600 for an hourly worker and $2,600 for a salaried employee. That doesn’t even include the lost productivity – it’s just wages and admin fees. Disengaged workers are 37% more likely to take days off without a medical reason, and that stacks up fast.

Turnover

Gallup estimates that turnover costs 50-200% of an employee’s annual salary in lost productivity, recruitment, administration, and other costs. Separate figures from the Corporate Leadership Council suggest disengaged employees are 87% more likely to leave, while Gallup estimates that high engagement in low-turnover industries reduces turnover by 59%.

Onboarding Costs

A new hire costs, on average, $4,700, according to SHRM’s Human Capital Benchmarking Report, and onboarding costs $3,000. New hires also take three months to become fully productive, and productivity during this time can be as low as 15%.

It’s clear, then, that a happy and engaged workforce is a productive workforce. So, it’s in your interest to ensure your employees feel connected to the company culture and happy in their roles and daily lives.

How to Measure Employee Engagement

These numbers are absolutely useful to measure the effects of employee engagement, but to effect change, you need to measure engagement before it gets to that stage.

The Employee Net Promoter Score (eNPS) has become the industry standard. It’s a derivative of the NPS that is widely used to measure customer satisfaction and can be as straightforward as one simple question: “On a scale of 0-10, how likely are you to recommend this company as a place to work?”

Based on their responses, employees are categorized into three groups: promoters, passives, and detractors. Promoters are highly engaged employees, while detractors are disengaged and likely to spread negative sentiment, and the eNPS is calculated by subtracting the percentage of detractors from the percentage of promoters.

It’s a simple equation, but it has proven highly effective in identifying engagement problems and effecting change.

Conclusion

The numbers show that even a small boost in employee recognition and engagement pays off in a big way when it comes to your bottom line. So it's time to take action with an employee recognition program and make staff engagement a priority that pays for itself and so much more.