Ill health and distraction at work: Costs and drivers for productivity loss

Employer-sponsored health insurance is the most widely spread form of medical coverage in the United States. Substantial portion of the premiums’ costs is covered by employers, thus contributing to labor costs for organizations. Although worker health and well-being have become increasingly important for businesses, most of them do not see a direct link between their health and well-being investments and work output and quality of work of their employees. This study aimed to estimate the cost of inefficiencies at work with emphasis on their internal causes, i.e., sick-related absenteeism and distraction at work. With data from 3,258 employees (2,775 office and 483 manufacturing) from a major US manufacturer with revenue of $6 billion, monetary loss in productivity due to sick-related absenteeism and distraction among office and factory floor employees was assessed. The Work Productivity and Activity Impairment scale and the Health-related Lost Productivity Time tool (both already validated) were used to estimate the cost of productivity loss. Survey data on health-related absenteeism and distraction time at work, together with company pay records, were used. A secondary analysis, using survey data collected from 615 Polish apparel factory workers at a major global brand complemented with their payroll records (absenteeism and salary), was conducted to validate the main findings. Results of the primary analysis indicated that annual productivity loss to the organization amounted to approximately $300 m. Distraction contributed to 93.6% of the annual productivity loss of the US manufacturer, while only 6.4% resulted from health-related absenteeism, implying that distraction at work cost this organization almost 15 times more than health related absenteeism, reducing the overall return on sales by over 6 pp. The secondary analysis corroborated the dominance of distraction induced productivity costs over the cost of health-related absenteeism. Evidence from the regression analysis conducted on cross-sectional data indicated that regardless of the type of work, work engagement and auditory privacy were evidently highly bound with productivity loss. For manufacturing workers, job security was also negatively correlated with productivity loss, while for office employees, better social relationships and lack of work-family conflict were positively associated with productivity. Despite being based on two case studies, our results are informative of the magnitude of distraction and health related productivity costs. They also show that workers with deficiencies in their well-being at work present a substantial opportunity for growth to companies in terms of reduced efficiency.