How Do You Calculate the ROI on Employee Engagement?

Employee engagement may be defined as proactively and passionately adding value while aligning with the company mission. Engaged employees demonstrate their commitment through their hard work, communication and body language. Because engagement impacts your bottom line through higher productivity and less turnover and absenteeism, knowing what a fully engaged team can do for your business is essential. Here’s how to calculate your ROI on employee engagement.

Reasons Employee Engagement Matters

Engaged employees are more focused and efficient than nonengaged employees. Engaged staff openly communicate about experiences, triumphs and challenges. They genuinely care about their work and don’t let anything stand in their way of attaining success. Engaged employees appreciate receiving feedback on their strengths and weaknesses so they can improve their performance.

Calculate Your ROI on Employee Engagement

To determine your ROI on employee engagement, begin by calculating your revenue per employee, which measures how efficiently you utilize your employees. Divide your annual company revenue by your average number of employees. For example, if your annual revenue is $31,550,000 and your average number of employees is 29, $31,550,000/29 means you earn approximately $1,087,931 in revenue per employee.

Next, determine your cost of absenteeism per employee. For instance, if your absenteeism per employee averages out to be 1.2% of total working days (3 days per year), take 1.2% of revenue per employee and add 1.2% of average employee salary. Based on the previous example, if your revenue per employee is $1,087,931 and average employee salary is $61,812, $1,087,931 x 1.2% = approximately $13,055 and $61,812 x 1.2% = approximately $742. Adding $13,055 + $742 means your cost of absenteeism per employee is $13,797.

Then, calculate your turnover rate by dividing the number of employees who left during the year by the average number of employees during the year. Based on the previous example, if your number of employees who left during the year is 11 and average number of employees during the year was 129, 11/129 means your turnover rate is 8.5%.

Next, determine your total cost of employee turnover by multiplying the average cost to replace an employee by the number of employees who quit or were fired last year. According to the Society for Human Resources Management, it costs 6-9 months of an employee’s salary to replace that employee. Nine months’ salary was used for this formula. So, $61,812/12 = $5,151 per month in salary; $5,151 x 9 = $46,359 for nine months’ salary. So, on average, if your cost to replace an employee is $46,359 and 11 employees quit or were fired last year, $46,359 x 11 = $509,949 in employee turnover.

Determine Your Total ROI

Finally, determine your total ROI value, which is the amount of revenue added due to a 20% increase in employee productivity, plus the money saved from a 41% reduction in absenteeism and 40% decrease in turnover. Based on the previous example, an increase in revenue would bring in an additional $28,068,594 ($1,087,931 x 20% = $217,586; $217,586 x 129 = $28,068,594). A reduction in absenteeism would save you $1,050,060 ($13,797 – 41% = $8,140; $8,140 x 129 = $1,050,060). A decrease in turnover would result in an additional $305,969 in revenue ($509,949 – 40% = $305,969).

Hire Engaged Employees

Hire engaged employees through Casey Accounting & Finance Resources. As a top Chicago employment agency, we provide high-performance candidates who make strong contributions to their companies. Partner with us today!

Top Finance & Accounting Candidates – December

We wanted to introduce some amazing accounting professionals we have recently surfaced who are looking for new opportunities.  Each of these candidates would be a great addition to your team!

Frank –  Credit Manager CCP

Frank is available on a contract to hire and direct hire basis. He has worked within organizations ranging in sales revenue of $350M-$1B+. Frank was responsible for 28 locations in multiple states. He carried a 90 percentile in current with his locations combined and collected 101% of his receivables and carried a DSO of 30 days. He effectively collected more than $150M per year in credit payments. He is proficient with Agility and SAP.  Frank has managed and mentored up to 6 professionals.

Karolina – Accounting Manager

Karolina is a finance and accounting professional with over 10 years of leadership and global experience overseeing financial planning, budgeting, and forecasting processes, developing financial analytics, standardizing reports and processes. Carolina has significant experience collaborating with executive leadership to analyze results and translate them into successful strategies and process improvements and increased financial performance. She is available on a direct hire basis. .

Angela – Accounts Receivable Specialist

Angela has excellent communication skills and 3+ years of accounts receivable experience using SAP. Experience with collections, cash posting, financial analysis, and strong Excel skills (Pivot tables, v-look ups, macros, formulas). She is open to contract and contract to hire.

Sean – Staff Accountant

Sean possesses 10+ years progressive experience that includes; sales and use tax, month-end close, accruals, and accounts payable. Strong knowledge of SAP and MS Excel (pivot tables, lookups, formulas, sum-ifs). Sean is available on a direct hire and contract to hire basis.

Please let me know if you or someone you know would be interested in setting up a time to meet with one of the accounting professionals.