Acas: Conflict costs employers almost £30bn a year

Workplace conflict costs UK employers £28.5bn a year, according to a new report from conciliation service Acas.

Handling formal and informal complaints associated with workplace conflict, legal processes, sickness absence and resignations can cost more than £1,000 per employee per year, Acas said.

This rises to just under £3,000 per year per person involved in the conflict, it added.

In 2018-19, 9.7 million employees experienced some form of conflict at work, according to its report, Estimating the Costs of Workplace Conflict.

Businesses spent £10.5bn on disciplinary dismissals, £11.9bn on resignations and £2.2bn on related sickness absence over the same period, it found.

Acas also highlighted the cost of recruiting replacement employees (around £2.6bn a year), and noted that the majority of employees who suffer depression or stress because of conflict continue to work, and this presenteeism could have a negative impact on productivity to the tune of up to £2.3bn.

One in five employees took no action in response to the conflict in which they were involved, according to Acas, while around a quarter discussed the issue with the other person involved.

Just over half of all employees discussed the matter with their manager, HR team or union representative. However, these informal discussions still cost UK organisations an estimated £231m each year.

When it came to formal grievances, there is an average of just under 375,000 per year, according to Acas.

It estimated that the average cost in management time of a formal grievance is £951, giving a total cost across the economy of £356m. Add formal disciplinary proceedings to that and there is an extra £2bn cost to the economy.

By far the largest proportion of costs associated with workplace conflict come from ending the employment relationship, either through resignation or dismissal, the report found.

Acas said that 136,249 Early Conciliation (EC) notices were submitted across the UK, including 132,711 in 2018-19, indicating an intention to pursue an employment tribunal claim.

It calculated that the cost of management time spent dealing with potential and actual litigation was £282m each year, with a further £264m spent on legal fees. Acas estimated that £225m in compensation was awarded against employers per year.

Dealing with complaints early can mitigate the risk of employment relationships being beyond repair and save businesses money, it advised.

The report makes a number of recommendations to employers on how to achieve this, including:

• Investing in effective and early resolution
• Placing greater emphasis on repairing employment relationships and acting early to address performance issues
• Training line managers in core people skills to have “quality interactions” with staff
• Rebalancing policies to decrease the emphasis on legal compliance and to reaffirm the importance of resolution.

Acas chief executive Susan Clews said: “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,” she added.

The report concluded that “problems suppressed during the crisis” could start to rise to the surface, while the shift to more permanent remote working would create “new challenges for the effective management of people, placing a premium on the skills needed to prevent, manage and resolve conflict”.

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