5 million dollars down the drain: Is employee burnout draining company profits?

Employee burnout is no longer just a personal struggle — it’s a financial drain that is costing businesses millions.

A recent study published in The American Journal of Preventive Medicine estimates that burnout costs the average US company with 1,000 employees approximately $5.04 million annually.

This significant expense results from productivity losses, absenteeism and disengagement across different levels of the workforce.

The cost breakdown varies depending on an employee’s role within a company. Burnout-related disengagement costs an employer around $3,999 per year for an average non-managerial hourly worker, while the cost increases to $4,257 for a salaried non-managerial employee.

Managers experiencing burnout result in an average cost of $10,824 per year, while executives — who experience burnout less frequently but have a greater financial impact when they do — cost approximately $20,683 per year.

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A company’s bottom line is affected not only by direct productivity losses but also by the ripple effect of burnout. Researchers note that burnout spreads among employees, particularly in workplaces where disengaged workers influence colleagues through their lack of motivation and reduced performance.

“Burnout is pervasive and it’s costing organisations millions each year,” said Molly Kern, professor at the Zicklin School of Business at Baruch College and co-author of the study. “Organisational leaders need to consider how their cultures and benefits programs support the 60 per cent of employees silently struggling with burnout."

What causes burnout & how it affects productivity

Burnout is a state of chronic emotional, mental, and physical exhaustion caused by prolonged stress, excessive workload, and insufficient recovery time. While the Mayo Clinic defines burnout as work-related stress that results in feeling powerless, emotionally drained, and unmotivated, it is not classified as a medical diagnosis.

However, it has been linked to serious health issues such as depression, anxiety, and cardiovascular diseases.

The study, conducted by researchers from the CUNY Graduate School of Public Health and Health Policy, Baruch College, Johns Hopkins University and the University of San Diego Knauss School of Business, utilised a computational model to simulate an employee’s journey through various engagement states — from full productivity to burnout.

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This model factored in workplace stressors such as workload, lack of recognition, fairness and community, as well as external factors like family dynamics, financial strain and personal health.

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The study found that 89.5 per cent of burnout-related costs stem from presenteeism — when employees come to work but are too disengaged or exhausted to be productive. The remaining 10.5 per cent of costs come from absenteeism, or employees taking time off due to burnout-related stress.

Additionally, burnout can have a “network effect,” meaning the more employees experiencing burnout in a workplace, the more likely it is to spread to others.

This collective disengagement further exacerbates the financial losses for companies, making it a widespread issue rather than an isolated problem.

Recognising burnout: Key warning signs

Employers must be able to identify the signs of burnout early to prevent costly losses in productivity. Common indicators of burnout include:

• A decline in work performance and motivation

• Frequent mistakes and missed deadlines

• Increased absenteeism or frequent sick days

• Disengagement from colleagues and workplace activities

• Complaints of exhaustion, stress, or lack of recognition

A 2024 SHRM Employee Mental Health study found that 44 per cent of US workers reported feeling burned out. According to the American Psychological Association, the primary causes of burnout include excessive workloads, long hours, insufficient managerial support, lack of recognition, and workplace conflicts.

The financial toll of burnout is significant, with costs ranging from 0.2 to 2.9 times the average employer-sponsored health insurance expense and up to 17.1 times the cost of training an employee.

How employers can reduce burnout and its costs

Preventing burnout is not just a well-being initiative; it’s a strategic financial decision. Companies that take proactive steps to reduce burnout can significantly lower productivity losses and improve overall employee retention.

Bruce Y Lee, the study’s senior author and professor at CUNY, stated, “Our model quantifies how much employee burnout is hitting the bottom line of companies and organisations. Therefore, it can give companies and organisations a better idea of how focusing more on employee well-being could help decrease costs and increase profits.”

To address burnout, companies can take several steps:

• Offer flexible work arrangements: Allowing remote or hybrid work options can help employees manage stress better.

• Ensure fair workload distribution: Preventing overwork and properly balancing responsibilities can reduce burnout risk.

• Provide mental health support: Offering mental health benefits, employee assistance programs (EAPs), and stress management resources can be crucial.

• Recognise and reward employees: Acknowledging employee contributions through incentives, promotions, and public recognition can enhance morale.

• Create opportunities for professional development: Employees who see a clear career path within an organisation are less likely to feel disengaged.

Additionally, workplace conflict resolution firm Pollack suggests that companies should implement stress management workshops and professional development opportunities to promote a healthier work environment.

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Employee burnout is not just a personal issue; it’s a corporate financial crisis.

The key takeaway is clear: businesses that take burnout seriously will see tangible benefits in both employee satisfaction and profitability.

With inputs from agencies