New ACAS report estimates £28.5bn annual cost of employee conflicts. What lessons can we learn?

1st June 2021

An in-depth study carried out by ACAS (the Advisory, Conciliation and Arbitration Service) was published on 11 May 2021, in which the costs of workplace conflict were investigated over a period of 12 months between 2018 and 2019. The report concluded that the total annual cost to UK organisations of employee conflicts is an eye-watering £28.5bn.

Put into context, this equates to just over £1,000 per year for every employee in the UK and around £3,000 per year for each employee involved in conflict. Whilst the headline figure most easily grabs the reader’s attention, some of the more surprising conclusions are to be found in the analysis ACAS has undertaken as to where, in the lifetime of an employee conflict, these costs arise.

The report breaks down the costs of the various stages of an employee conflict:

  • Cost of resignation, absence and ‘presenteeism’ – £14.7bn
  • Cost of informal resolution – £0.25bn
  • Cost of formal procedure – £12.8bn
  • Cost of litigation – £0.77bn

Employers will need to read the report for themselves and form their own views on the assumptions ACAS has made in reaching these conclusions. However, taking the report on face value, it seems that the greatest opportunity for costs saving arises in the earliest stages of conflict, and more particularly in proactive employee relations management to nip issues in the bud; the resource taken up in replacing disaffected employees who have resigned (often without ever raising a formal grievance) accounting for a staggering 50% of the overall estimated cost.

Employers will also note that out of the almost 10m employees that had some form of workplace conflict, only 5% actually resigned. This seems to suggest that employees generally want to resolve their conflicts, with resignation usually a last resort.

The report’s overall conclusions are as follows:

  • Investment in effective and early resolution designed to repair the employment relationship may have a very significant return. For example, if managers identify problems at an early point, then unnecessary resignations can be avoided and issues with conduct and performance are less likely to escalate to the point of dismissal.
  • The average costs of conflict where employees did not engage with their managers, HR or union representatives were higher than where such discussions took place.
  • Where conflict spiralled into formal procedures, costs were more than three times those associated with informal resolution (and account for 45% of the total estimated cost of conflicts).

At first glance, another surprising statistic is that the overall costs of dealing with litigation was less than 3% of the total cost to employers, but of course part of the reason is that the proportion of employee conflicts that actually result in litigation is relatively low.

What is clear, however, is that there are real opportunities for employers to make substantial costs savings by addressing questions of employee welfare and conflict resolution in a proactive way.

With Covid-19 restrictions gradually being relaxed and the work from home guidance in the UK being lifted on 21 June, it is even more crucial that employers take steps to ensure that employee welfare and conflict management are prioritised.

So, what can employers do in a post Covid-19 world, to mitigate the costs of workplace conflict?

  1. Be prepared for the vulnerability of employees at this time. Employees may be faced with feelings of insecurity, anxiety, uncertainty, and apprehension to come back to the workplace. Additionally, it is worth bearing in mind that the environment may be tense if some employees were furloughed while others were not.
  2. Ensure the workplace is Covid-19 compliant, with all government guidelines in place to reduce the risk of transmission as much as possible. This may help reduce employees’ anxiety and potentially reduce the risk of resulting conflict.
  3. Have support services set up in place and promote access to them. Examples include offering counselling services, mental health days and continued flexible or remote working where possible.
  4. Have regular check ins with employees to see how they are faring.
  5. Review your employee relations policies, especially your grievance, dignity at work and home working policies and procedures. Are they still fit for purpose in a post Covid-19 environment?
  6. Consider the use of workplace mediation or other forms of alternative dispute resolution as a part of any policy review.
  7. Early intervention with any conflicts is key. Deal with any issues that arise early and always aim to resolve them informally. This is essential not only to save costs but also to promote better working relationships and mental wellbeing.

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