The true (financial) costs of workplace violence in Australia

Abstract

There is a need to determine the contemporary financial costs of workplace violence to the Australian economy. Since 2001, this intractable and typically gendered workplace problem has been viewed through a mythical lens which suggests it costs Australia between $6–36 billion every year. For over two decades, this estimate has been touted as an immutable source of truth. Accurate and realistic costings could support better policy and regulatory approaches to the prevention and effective management of workplace violence while also protecting those vulnerable members of our community who are most at risk of ongoing harm on account of workplace violence.

In 2001, a seminal paper was presented at the Standing Conference on Organizational Symbolism (SCOS) at Trinity College in Dublin, Ireland. ¹ The paper, ‘A model for assessing the impacts and costs of workplace bullying’, was written in 2000 by Sheehan et al, then from the School of Management at Australia’s Griffith University in Queensland. ²

More than two decades ago, the authors noted that while there was a significant body of work highlighting the psychological and other costs of workplace violence, few studies had attempted to quantify the true (financial) costs of workplace bullying to organisations and the Australian economy more broadly. ³

Significantly, the work of Sheehan et al did not address the gendered nature of workplace violence. In simple terms, the gendered landscape of workplace violence means that women (and other vulnerable groups) are disproportionately targeted. This reality translates to these workers, as a cohort, experiencing greater financial detriment attributable to the adverse consequences which flow from workplace violence, including ongoing medical and legal costs, loss of career, and loss of promotional and other opportunities.

True accounting for true harms

The ‘hidden’ costs dimensions of workplace violence, which Sheehan et al understood as having potentially far greater economic consequences, ⁴ have largely been ignored by both researchers and policy makers.

Back in 2000, after identifying and including some of the ‘hidden’ costs of workplace violence and relying on estimates at that time of claimed workplace bullying prevalence rates in Europe and the United States, Sheehan et al attempted to quantify the cost to Australia of workplace bullying. They assumed both a (conservative) bullying prevalence rate of 3.5 per cent and a higher prevalence rate of 15 per cent to calculate a range of indicative costs in Australia, in 2001. ⁵ Assuming those rates, they estimated the annual cost to Australian employers of workplace bullying to be between $6 billion and $36 billion.

In the ensuing decades, on any measure, the estimated cost of workplace violence to the Australian economy must have soared. However, the (original) annual costs estimate of $6 billion–$36 billion has simply languished, unchallenged. This redundant estimation has repeatedly been advanced by successive Australian governments, as gospel. ⁶

The 2001 estimated cost figure is still, more than 20 years on, relied upon and cited. It is commonly reiterated by the Australian government, with the Productivity Commission typically referenced as the official source of truth. ⁷

This is true despite inflation, a significant increase in the cost of living since 2001, and the reality that Sheehan et al only ever intended that their paper provide an initial and ‘conservative’ assessment of the range of costs of workplace violence. ⁸ They also noted that some impacts could not be costed (at the time) and so were not considered in their costs calculations. Significantly too, the costs of sexual harassment as a form of workplace violence were not contemplated by Sheehan et al in 2001. In 2018, Deloitte Access Economics found that workplace sexual harassment alone cost the Australian economy an estimated $3.8 billion. ⁹

Allowing for an increase in the value of the Australian dollar over the last 22 years (and still relying on an assumed workplace bullying prevalence of 3.5 to 15 per cent), the original $6–36 billion estimate now translates to a (conservative) annual cost to the economy of $10–60 billion. ¹⁰

In 2014–15, between 9.4 and 9.7 per cent of Australian workers reported having been bullied in the previous six months. ¹¹ These figures are likely an underestimate, but even relying on reports of only around 10 per cent of Australian workers being subjected to workplace violence, we suggest that the minimum annual cost of workplace bullying to the Australian economy today would be more in the ballpark of $30 billion. ¹²

This revised estimate only uses the original parameters of Sheehan et al. It does not factor in those things which Sheehan et al could not cost in 2001 – the additional ‘hidden’ costs of workplace violence identified since 2000, or the costs of workplace sexual harassment. For the sake of completeness, we note that in 2018, 33 per cent of workers reported experiencing workplace sexual harassment in the previous five years (39 per cent of women as opposed to 26 per cent of men); this is more than three times the 10 per cent estimate we have used to update Sheehan et al’s original costs estimate. ¹³

Given that the harms to targets (and bystanders) of workplace violence can be catastrophic, chronic and life-long, would it not be prudent for governments to work to identify and quantify as many of the real costs associated with workplace violence as possible, and then act to reduce those costs?

What are the true (financial) and hidden costs of workplace violence?

Sheehan et al identified the overt costs of workplace violence as including absenteeism and staff turnover of targets and co-workers, compensation costs for bullying disputes conciliated and mediated in-house, legal and compensation costs for court and tribunal matters, and redundancy and early retirement payouts. ¹⁴

Some of the hidden costs of workplace violence were also identified. These included the cost of formal grievance procedures, management/supervisor time in addressing impacts (likely underestimated as the authors noted), the provision of workplace support services (such as Employee Assistance Programs and Human Resources) and workers compensation costs. These so-called hidden costs of workplace violence were purported to be generally higher than the overt costs. ¹⁵

Other costs which Sheehan et al factored into the annual estimate of the cost of workplace violence to the Australian economy included productivity losses associated with targets’ reduced work performance, the sourcing of replacement employees, internal transfers, and absenteeism.

They also included intra-sector lost-opportunity costs (eg, loss of innovation and creativity and subsequent impact on corporate growth and market share, etc), and the out-of-sector flow-on costs of lost opportunities (eg, the business sector’s tax share of public sector funding for health, counselling, unemployment benefits, income support and other publicly funded target (or victim) services). ¹⁶

What costs were not included?

Many other significant and likely quantifiable factors, including the cost of sexual harassment at work, were presumably not factored into Sheehan’s ‘conservative’ annual estimated costs of workplace violence to organisations and the economy.

Apart from the omitted costs of workplace sexual violence, other costs excluded from Sheehan’s estimate were those associated with medical, psychological and psychiatric treatment, increased worker’s compensation insurance premiums, and the costs associated with return-to-work, rehabilitation programs, and sourcing of alternative employment for injured workers.

Other excluded hidden costs are the costs of obtaining evidence in litigation, including expert medical and other reports – such that parties in workplace violence, worker’s compensation and National Disability Insurance Scheme (NDIS) litigation often source multiple reports until they secure one that is favourable to their client (or run out of money).

The true costs associated with disability and other government support payments, and the cost of NDIS plans and services for workers so damaged by workplace violence that they sustained ongoing, often lifelong disabilities, were also omitted, noting that the NDIS scheme was introduced many years after the costing research was completed.

Of course, there are other ‘hidden’ costs associated with vulnerable and injured workers even accessing the NDIS (or workers compensation schemes) in the first place.

Additionally, in 2001 there was no factoring of an appropriate proportion of operating costs of government regulators and other bodies (such as the Fair Work Ombudsman, Fair Work Commission, Australian Human Rights Commission and any state and territory counterparts). These organisations play various roles in managing different aspects of workplace violence.

Apparently also omitted from the 2001 estimated costs of workplace violence were the costs associated with reputational damage to organisations and individuals, the loss of investors and customers, the cost of public relations campaigns, the cost of union activity (eg, ‘go-slows’ and strikes, etc), decreases in employee morale and loyalty, the loss of careers, reduced superannuation entitlements (and the possibility of an increased reliance on government income support), and the use of different forms of leave by targets to self-manage their experiences of workplace bullying (such as annual, personal and long service leave, leave without pay, and so on).

Further, the costs associated with the inability of organisations to attract good staff, as well as costs associated with retraining existing staff and recruiting new staff, have not been included or comprehensively determined.

Other missing numbers are the cost of workplace investigations into alleged workplace bullying and code of conduct matters, the costs incurred consequent to death by suicide or illness following exposure to workplace violence, the cost of relevant organisational policy development and implementation, cultural reviews directed towards addressing problematic workplace cultures, and the mechanisms then implemented in attempts to address these issues. ¹⁷

It is probable that there are also many other impacts and factors related to workplace violence which have not yet been properly identified or costed.

How are the true costs of workplace violence measured?

Information on workplace violence-related expenditure by governments and organisations in annual reports is scant and obscure. What there is, typically needs to be extrapolated and assembled through detailed analyses of various ambiguous ‘line entries’ in their financial accounts which are also inconsistent between agencies.

For example, the Services Australia Annual Report 2019–20 lists ‘employee benefits’, ‘supplier expenses’ and ‘other expenses’ under ‘expenses’ in its financial statements. In the accompanying notes, ‘employee benefits’ are stated to include ‘leave and other entitlements’, ‘separation and redundancies’ and ‘other employee expenses.’ At least some of these expenses must be attributable to workplace bullying, but how would we know? ¹⁸

Under ‘supplier expenses’, the notes contain separate line entries for ‘consultants and contractors’, ‘legal services and compensation’, and ‘other’. ‘Worker’s compensation premiums’ are indicated under the ‘other supplier expenses’ category. ¹⁹ ‘Resolution of claims’ is listed under ‘other expenses’. ²⁰ Again, at least some of these expenses are likely attributable to workplace violence, but how would this be independently determined in the absence of any specificity with respect to these expenses?

Our approach

In trying to ‘follow the money’ and identify if, and how, Australian government agencies reported on the costs of workplace violence, we looked at the annual reports of a number of other government agencies at the Commonwealth, state, and territory levels. We aimed to obtain an initial picture of how, if at all, workplace violence and associated costs were reported. To do this, we selected a small number of different-sized agencies at random to gain some preliminary insights into what, if anything, different bodies reported.

We included several ‘whole of government’ reports, as well as publicly available information from agencies such as the Australian Bureau of Statistics (ABS), Safe Work Australia, Comcare and the Office of Legal Services Coordination.

To lay the groundwork for more comprehensive future research, we initially wanted to explore two key questions:

• Do agencies report on workplace violence and, if so, how? For instance, do they report the number, type, seriousness, and manner of resolution (or not) of matters? Do they report the number of non-disclosure agreements (NDAs)? Is any de-identified information about cases made available?

• Do agencies report on the cost of internal and external legal services, including any compensation paid in relation to resolving complaints of workplace violence?

Of the agencies explored we found, in general, a lack of disclosure of information about workplace violence in any easily accessible or consistent way.

Some organisations provide limited information without any necessary focus on cost. To identify the different ways that agencies might report, we accessed annual reports and used a range of search terms including ‘bullying’, ‘harassment’, ‘complaints’, ‘work health and safety’, ‘violence’, ‘misconduct’, ‘agreements’, and ‘investigation.’ We also looked for legal and consultant fees, and such like, in the annual financial reports.

At times, some of the costs of workplace violence could be extrapolated from the available data. For example, since 2013 the Australian Department of Defence’s Sexual Misconduct Prevention and Response Office (SeMPRO) has reported on and summarised the numbers of sexual misconduct complaints (2242 in the seven financial years from 2013–2020) and departmental services provided to employees reporting sexual violence and harassment. These services are broken down into support, advice, and debriefing. ²¹

Safe Work Australia, the Australian government statutory body established in 2008 to develop national policy relating to work health and safety and workers’ compensation, provides statistical information on how many workers have experienced workplace violence in government agencies. ²²

In 2016, the ABS found that 1 in 2 women (53 per cent or 5 million) and 1 in 4 men (23 per cent or 2.2 million) had experienced (sexual) harassment during their lifetime. However, the research did not clarify whether this was ‘work-related’ violence or provide any associated cost estimates. ²³ In 2023, the ABS reported that an estimated 8 million Australians (41 per cent) have experienced violence (physical and/or sexual) since the age of 15, including 31 per cent of women and 42 per cent of men who have experienced physical violence; and 22 per cent of women and 6.1 per cent of men who have experienced sexual violence. ²⁴

In other settings, some artificial costings have been done. For example, a 2018 report by Deloitte estimated that workplace sexual harassment cost Australian workplaces $2.6 billion annually in lost productivity alone. This estimate was based on the Australian Human Rights Commission’s 2018 fourth national survey of workplace sexual harassment. ²⁵

We did not identify any Australian government agency that reports comprehensively or consistently on the legal costs or other costs associated with workplace violence, the number of NDAs, the costs of settling workplace violence disputes or of paying compensation to targets of violence. Some Australian government organisations may do this – our preliminary work was necessarily limited to a snapshot of a small number of agencies which were selected at random.

Some organisations do publicly acknowledge that workplace violence is a problem in their organisation, but ‘motherhood statements’ of this type do not assist in quantifying the true fiscal cost of what is a complex and multifaceted problem, either to the entity itself or to the broader Australian economy. ²⁶

While there are government agencies collecting some information which is relevant to helping determine the true cost of workplace violence annually, they (and others) should be required to do more.

It is worth noting that the situation within Australia’s private sector is little different. Less than 20 per cent of large Australian companies make their directors responsible for preventing and responding to workplace (sexual) harassment. Despite many sexual harassment cases, less than 50 per cent of company boards regularly discuss the issue. ²⁷

International reporting of the costs of workplace violence

Internationally, we found examples of governments reporting (some) costs of workplace violence, but typically only in a piecemeal manner. For example, since at least 1994–95, Canada’s public accounts have detailed, by ministry and program, payments of $1000 or more for claims (including for bullying and discrimination) against the government.

Canada offers accessible, if not well publicised, public financial records of payments for different employee grievances, including for workplace bullying, harassment and discrimination. In some cases, the names of targets/complainants and the compensation amount paid is itemised, together with the name of the offending department. ²⁸

United Kingdom (UK) based studies estimate that the annual cost of lost productivity (only) due to workplace bullying ranges from £1.5 billion to £9.5 billion, while in Ireland in 2020, the lost productivity was estimated to be in the order of €239.3 million. ²⁹ Estimates of the annual cost of workplace bullying in the UK’s National Health Service total is (cautiously) claimed to be £2.281 billion. ³⁰

Kline and Lewis, in their 2020 study into workplace bullying in Ireland, noted that quantifying many of the costs of workplace bullying was hindered by a lack of published data. ³¹ Further, they could not financially cost many relevant factors (eg, the experiences of workers who witness bullying (bystanders)) because of a lack of reliable evidence. ³²

We note that bystander exposure is also associated with increased staff turnover, absenteeism and reduced productivity costs.

Cullinan et al found that ‘workplace bullying is a pervasive problem with significant personal, social and economic costs’ – both direct and indirect – to impacted individuals and organisations. ³³ They also noted that while previous research highlights the many different individual and social costs of workplace bullying, the associated wider economic costs had received less attention. ³⁴

Further, they observed that ‘as with many work-related problems, the indirect and unquantifiable costs’ add significant weight to the argument that a concerted effort is needed to address the issue. ³⁵ Again, this work supports the need for an interdisciplinary approach.

Internationally, we found little evidence of government agencies comprehensively, reliably, or repeatedly collecting data on, and reporting the cost of workplace violence. Of those that do report on some aspects of workplace violence there is little consistency in what or how they report. This makes comparison between organisations or countries unreliable. It also minimises any opportunity to measure which strategies employed to address workplace violence work.

Corporations, like governments, are concerned about reputational damage, and they often allocate significant resources to protect the reputations of the company and of alleged perpetrators – particularly if they occupy a senior position within the organisation – and often including through the use of NDAs. ³⁶

This approach though is harmful in the sense that it works to conceal the workplace violence while also hampering prevention efforts. Knowing the true extent and cost of workplace violence is surely in the public interest as may also be some of the information concealed within NDAs.

In respect of NDAs, what is the rationale for hiding the amount of compensation paid to targets and the cost of investigations, mediations and legal services used in managing complaints of workplace violence? The lack of transparency around the numbers and costs promotes a culture of silence which also denies us the opportunity to measure the true cost and consequences of workplace violence, and to address its adverse impacts.

If resources are being allocated to training, process and cultural change, there must be a way of measuring what strategies are effective. As Drucker is (mis)reported as having observed, ‘what gets measured gets managed.’ ³⁷ Logically then, what does not get measured does not get (effectively) managed.

Conclusion

As noted above, some claim that Drucker’s advice about being unable to manage what you don’t measure is a mythical attribution. ³⁸ However, this does not detract from the importance of measuring those things you can. Drucker did accept that measuring results and performance was crucial to an organisation’s effectiveness. He also believed that management’s first role was a personal one: ‘the relationship with people, the development of mutual confidence … the creation of a community’ were all seen as fundamental. ³⁹

While the $6–$36 billion estimated annual cost of workplace violence to the Australian economy has achieved legendary status over the past 22 years, it is a mythical figure.

Much has changed since 2001 and it is likely that there are now many easier and better ways of identifying and reporting all the costs associated with workplace violence.

More than two decades ago, Sheehan et al did important foundational work which needs to be revisited and revised. It was only ever intended to be ‘an initial assessment of the impacts and costs of workplace bullying that extends to a wider and more comprehensive range of impacts than addressed in other studies’. ⁴⁰ It presented ‘indicative costings’ only and noted that as

the quality of the information base for costing different components improves with further quantitative research into bullying and its impacts, the estimates can be based on increasingly more accurate and comprehensive sources of information. ⁴¹

The minimum annual cost of workplace violence (excluding sexual harassment) is now likely at least $30 billion. The government needs to take definitive steps to ensure that the true costs and wide-ranging impacts of this injurious phenomenon are properly measured in monetary terms. It also needs to ensure that proper transparent and public reporting is mandated along with initiating the development of a better public policy approach to the prevention and effective management of workplace violence.

Doing so will help organisations and governments identify where the problems lie and address them. Doing so will also help rebuild the many broken relationships, trust and confidence between employers, employees and the community, which are attributable to the harmful chronic secrecy and non-disclosure of workplace violence. It will also help foster workplace cultures where violence cannot survive or thrive.