Workplace conflict costs employers nearly £30bn a year

  • A new report estimates workplace conflict cost employers nearly £30 billion every year – almost £1,000 for every employee on average
  • The research, co-authored by the University of Sheffield, revealed approximately 60 per cent of workers involved in workplace conflict suffered with depression as a result
  • Findings suggest conflict was suppressed during the height of the Covid-19 pandemic due to increased home-working and a sense of solidarity, however cases are expected to increase as employees head back to the workplace
  • Early identification and intervention, and more informal resolution are the most effective ways for a company to safeguard performance during periods of conflict

New analysis published today (11 May 2021) estimates workplace conflict costs UK employers £28.5 billion every year – just over £1,000 on average for every employee.

The report, published by Acas (Advisory, Conciliation and Arbitration Service) and authored by researchers at the Universities of Sheffield and Westminster provides shocking reading about the impact workplace conflict has on UK business.

‘Estimating the Costs of Workplace Conflict’ estimates 9.7 million employees experienced conflict in 2018/2019.

The biggest annual costs to employers identified in the report include:

  • £11.9 billion from resignations;
  • £10.5 billion from disciplinary dismissals; and
  • £2.2 billion from sickness absences.

The estimates are based on the total cost to organisations in handling workplace conflict, which includes informal, formal and legal processes as well as the cost of sickness absences and resignations.

Of the 9.7 million workers who experienced conflict of some kind at work in 2018/19, more than half suffered stress, anxiety or depression as a result; just under 900,000 took time off work; nearly half a million resigned, and over 300,000 employees were dismissed.

Professor Richard Saundry from the University of Sheffield’s Management School, said: “This report has revealed the true scale of the impact conflict in the workplace can have, not only in financial terms for the company, but also on workers wellbeing.

“The nature of workplace conflicts is typically opaque, with issues going under the radar as people don’t like to talk about them openly. The reality is that workplace conflict is extensive, with many experiencing stress, anxiety and depression as a result.

“Not only this, but the escalating issues that lead to staff sickness, poor performance and resignation or dismissal come at a huge financial cost to the organisation.”

Until now, encouraging employers to put conflict resolution at the heart of organisational strategy has been challenging due to the lack of reliable quantitative data regarding the impact all types of conflict can have on employees.

Professor Saundry said: “Employers need to focus on early interventions, investing in effective resolutions to repair employment relationships. This can include managers identifying problems early to help prevent unnecessary resignations or dismissals and employees engaging with their managers, HR or trade union reps.

“The findings in this report create a strong business case for investing in the capacity to prevent, contain and resolve conflict. Perhaps most importantly we need to give managers the interpersonal skills they need to develop positive relationships with their staff and intervene early, informally and effectively before problems escalate.”

The report also suggests that conflict was suppressed during the height of the pandemic – in part due to increased home-working, but also to a heightened sense of solidarity. However, as the economy returns to a new normality in 2021, it is likely that insecurity, rapid change and continuing economic pressures will lead to an increasing range of complex personnel problems.

Organisations will need to address these issues, in a context where we have increased remote working bringing its own challenges and the need for new managerial skill sets.

“The Covid pandemic brought a sense of camaraderie amongst staff teams, but as things begin to unfreeze it’s likely that previous conflicts that had been ‘on hold’ will resurface. With trends leaning towards hybrid working, managers will have to navigate a team spread across the office and their homes, which will require a greater need for acute managerial skills,” said Professor Saundry.

“The future of the workplace will see a greater need for ‘conflict competence’, an essential ingredient in good management that has a positive impact on organisational effectiveness and performance.”

Acas Chief Executive, Susan Clews, said: “A failure by employers to deal with conflict early can be costly to businesses and our study estimates that these costs add up to nearly £30bn a year.

“Poor conflict management can also cause staff stress, anxiety or depression and impact workplace productivity. There’s a clear benefit to everyone in handling problems as early as possible.

“While our main findings relate to just before the pandemic took hold, our report reveals potential for increased conflict as organisations try to adapt to new changes after COVID-19.”

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