How to measure the ROI of employee engagement

Trying to prove that employee engagement really drives business results? You’re not alone. A lot of organisations out there find it hard to show a clear return on efforts to support people at work. The ROI of employee engagement can feel like a bit of a mystery. But it doesn’t have to be.

With the right data, simple formulas and a bit of context, you can show exactly how employee engagement links to improved retention, productivity and performance. And once you can measure it, it’s much easier to make a business case for continued investment in your people.

Related: Discover why People Insight is the most actionable employee survey platform

Why the ROI of employee engagement matters

It’s generally accepted that engaged employees contribute more. They’re more committed, more productive and more likely to stick around. But while that might feel obvious, it’s not always enough when you’re trying to get buy-in from senior leaders. They need more than gut feeling. They want evidence. Proof of return on investment. So what can we point to?

Focus on outcomes, not just outputs

Before you get into the numbers, make sure you’re measuring the right things. Outputs, like survey response rates or the number of engagement workshops run, are useful, but they don’t show business impact.

Outcomes are what matter here. Think of things like:

• Reduction in employee turnover
• Increase in output or sales
• Fewer sick days
• Improved customer ratings
• Higher retention in underperforming departments
  

This is where the ROI of employee engagement lives; in what actually changes as a result of your efforts.

Start with business metrics you can influence

To calculate ROI, choose business outcomes that engagement can realistically impact. Then gather your baseline figures.

Let’s look at three examples where you can apply actual ROI calculations.

1. Reduced turnover

Turnover is one of the clearest areas to demonstrate ROI.

Formula:

ROI = (Reduction in leavers × Cost per leaver) – Cost of engagement activity

Example:

• Number of employees: 1,000
• Annual turnover: 15% → 150 leavers
• After engagement action: Turnover drops to 12% → 120 leavers
• Average cost to replace an employee: £30,000 (Oxford Economics)
• Cost of engagement strategy: £100,000
  

Calculation:

• Leavers reduced by: 30
• Savings: 30 × £30,000 = £900,000
• ROI: (£900,000 – £100,000) / £100,000 = 800% ROI

That’s a strong return. And it’s based on data most organisations already hold.

2. Lower absenteeism

High engagement often leads to fewer sick days.

Formula:

ROI = (Reduction in absence days × Cost per day) – Cost of engagement activity

Example:

• Average sick days per employee: 7.8 (ONS)
• Company size: 500 people
• Total sick days: 3,900
• Cost per absent day (lost productivity): £125
• After engagement activity, average sick days drop to 6.5
• Cost of engagement activity: £50,000
  

Calculation:

• Reduction in total sick days: 650
• Savings: 650 × £125 = £81,250
• ROI: (£81,250 – £50,000) / £50,000 = 62.5% ROI
  

Even small improvements here can have a measurable financial impact.

3. Improved productivity

When people are more engaged, they get more done.

Formula (simplified):

ROI = (Productivity gain × Output value) – Cost of engagement activity

Example:

• Average annual output per employee: £100,000
• Estimated productivity increase through engagement: 3%
• Company size: 200 employees
• Engagement initiative cost: £40,000

Calculation:

• Additional value per employee: £100,000 × 0.03 = £3,000
• Total value gained: 200 × £3,000 = £600,000
• ROI: (£600,000 – £40,000) / £40,000 = 1,400% ROI

These figures will vary, but even modest gains in productivity can result in a strong business case.

Use the right engagement metrics

To link these outcomes to engagement, your surveys need to generate useful, specific data. Metrics to focus on include:

• eNPS: A simple measure of advocacy
• Engagement index scores: Reflecting motivation, pride and connection
• Manager-level trends: To see which teams are leading (or lagging)
• Open-text feedback themes: Offering insight into blockers and wins

An actionable employee experience platform helps you link these engagement metrics to the business data above. Look for tools that make it easy to filter by department, demographic and engagement driver so you can spot what’s moving the needle.

Don’t overlook intangible ROI

It’s important to remember that not all returns will show up in a spreadsheet. Stronger employee wellbeing, better morale, fewer HR complaints and more positive feedback from customers all count, even if they’re harder to cost.

That’s where platforms with sentiment analysis (through AI tools such as Prism) and 360 feedback tools can add real value. They give you the bigger picture, beyond numbers alone.

Related: Get strategic with employee listening through people analytics

Common obstacles (and how to handle them)

Measuring the ROI of employee engagement isn’t always clear-cut. Here are a few challenges we often hear, as well as ways around them:

• No clear baseline: If this is your first time measuring, use your current figures to create a starting point.
• Too many variables: While you can’t control everything, isolating one team or initiative and tracking over time helps show cause and effect.
• Siloed data: HR, Finance and Ops often don’t speak the same language. An integrated employee survey platform can help bring your data together in one place.

ROI matters, so it needs to be measured

The ROI of employee engagement is one of the clearest ways to connect people experience to business value. And when you can show that connection, it becomes easier to get the support, resources and time you need to make meaningful change.

In short: what gets measured gets noticed.

Want to turn engagement insights into real-world impact? Let’s talk. People Insight’s employee engagement survey platform is designed to deliver actionable feedback and impactful survey results that show you exactly where engagement drives value. Whether you’re looking to reduce attrition, improve productivity or boost wellbeing, we can help you measure what matters. Get in touch today to learn more.