Can you put a price on keeping your employees happy?

With the ongoing uncertainty surrounding job security during the pandemic, it’s no surprise to see workplace tensions at an all-time high. This has been confirmed by Acas, who have recently published a report, Estimating the Costs of Workplace Conflict.

The headline figure in the report suggests that workplace disagreements cost UK employers £28.5 billion per year.

When we break it down, this figure equates to roughly £1,000 for every UK employee. When we consider what we could invest that money into – professional development and wellness schemes to name but two – it does make us stop and think about our conduct in the workplace.

How the costs are broken down

Acas quantified the costs by assigning a monetary value to common processes including:

• Formal and informal conflict management
• Legal processes
• Sickness absence

When we look at the statistics, it’s easy to see how these figures add up. For example, staff turnover is highly costly to businesses – with the average new hire equating to £3,000 in training and recruitment.

Likewise, according to MentalHealth.org, the UK loses approximately 70 million working days a year to mental health-related absence. This equates to £2.4 billion in labour costs.

So, what exactly are the causes of these conflicts, and how can employers mitigate them?

Workplace conflict pre-and post-pandemic

The report, compiled using data from the CIPD before the pandemic, serves as a warning for HR managers as they begin to adjust to life post-COVID. The largest cost was connected to dismissals due to the formal processes involved.

Additionally, some of the biggest problems identified were presenteeism – including carrying on working while physically ill – as well as ‘informal conflicts’ between employees.

Employee grievances made up some 374,760 conflict cases, while disciplinaries were roughly 1.54 per 100 employees. It’s important to note at this stage that some conflict may be caused by ‘mismatches’ – hiring the wrong person for the job and subsequently recording poor performance.

However, the onus is always on the manager to detect and mitigate conflicts before they turn into costly processes.

Costs of not dealing with conflicts appropriately

If senior managers do not intervene at the right times, businesses could stand to lose significant sums, as highlighted by Acas’ figures. For example:

• Formal grievances cost £950.50 per employee
• Disciplinary action costs £1,141 per employee
• Mediation costs £1,500 per employee
• New hires can cost up to £5,433 each.

Likewise, we need to account for managers’ time handling conflicts – estimated at a total of £118 million per year. Meanwhile, for the employees who choose to stay in their role, further sums are lost in productivity.

The salient message here is that employers need to invest in early conflict resolution to avoid spiralling costs. As we can see, the further the conflict goes, the costlier it is to a business – which is why HR managers need to have effective conflict resolution policies in place.

What should HR teams and senior managers do?

Acas recommends putting a “much greater emphasis on repairing employment relationships in the event of conflict”. As mentioned above, this includes addressing any potential compatibility issues for the job role.

Managers need to avoid laying blame on any particular individual where it can be avoided. Rather, they should see the conflict as a learning opportunity, and reinvest in their staff.

Where possible, we should focus on the ‘informal’ route first, encouraging employees to feel comfortable enough to have a discussion with their managers. This may lead to HR involvement, which should be fair and balanced – ideally, with a third party.

Encouraging employees to speak up

These practices can be implemented from the point of hire. For example, in your company handbook, you should outline an open-door policy to encourage employees to speak with their line managers. Some of the biggest costs associated with conflict related to those who did not air their grievances.

Other policies requiring clear outlines include:

• Whistleblowing
• Grievance
• Dismissal
• Misconduct
• Social media.

You can hold yourself accountable by having clear documentation that is regularly reviewed. This may help to support your case should a worse-case litigation scenario occur.

Where Altum HR can help

With potential conflicts over working hours, furlough and return to work policies, many companies may find themselves overwhelmed with new conflicts. This is where outsourced HR consultancy can help – putting legally watertight policies and practices in place to protect your employees and your business.

Conflicts will always be a part of the workplace – but with the right communication and resolution, they should not have to cost.