Estimating the ROI of higher employee engagement

Revenue per employee = Annual company revenue / Number of employees

Cost of absenteeism per employee = (0.012 * revenue per employee) + (0.012 * average employee salary)
In the US, an average of 1.2% of total working days are unearned PTO. This model calculates costs due to absenteeism by adding 1.2% of revenue per employee and 1.2% of average employee salary. Source: Absenteeism: The Bottom-Line Killer

Total cost of absenteeism = Cost of absenteeism per employee * Number of employees

Average cost to replace an employee = Average employee salary * 0.75
While turnover costs are subject to substantial variation, SHRM estimates the average replacement of an employee to be 6-9 months of the replaced employee’s salary. Our model uses 9 months. Source: SHRM

Total cost of employee turnover = Average cost to replace employee * number of employees who leave per year
To estimate the number of employees that leave per year, this model multiplies the number of employees at the beginning of the year by turnover rate.

Revenue per employee with higher engagement = Revenue per employee * 0.2
Organizations with highly engaged employees experience 20% higher productivity. Source: Gallup
Organizations with a highly-engaged workforce experience 19.2% growth in operating income in a 12-month period. Source: MacLeod & Clarke

Absenteeism cost with higher engagement = Current absenteeism cost * 0.41
Highly engaged organizations experience a 41% decrease in absenteeism (Gallup).

Turnover rate with higher engagement = Current turnover rate * 0.4
Employee engagement leads to 24% lower turnover in high-turnover organizations and 59% lower turnover in low-turnover organizations. This model uses an average of 40%. Source: Gallup