Personnel costs are considerable for any enterprise. Of course, there are the direct personnel expenses of worker compensation, insurance, medical/pharmaceutical costs, and various benefits. However, indirect personnel expenses such as absenteeism, engagement, morale, overtime, replacement costs, overstaffing, delays, turnover, accidents, and various other such expenses factor into an enterprise's bottom-line as well. Recent studies have suggested that the cost per square foot of a corporate office space is overwhelmingly devoted to salary at just over 90 percent; followed by rent and mortgage payments at around 9 percent; and building energy costs amounting to just under 1 percent of total financial expenditure (BOMA, 2010, US Department of Labor, 2010).
Work environments have a major financial impact
As companies strategize toward re-entry and invite staff back into the office, it should be kept in mind that the physical workplace is consistently rated as one of the top factors affecting performance and job satisfaction. Consider the following:
- In a Dodge Analytics study, 69 percent of building owners reported that healthy building features increased employee satisfaction (Petrullo, 2016).
- In a CoreNet Global study, companies implementing healthy workplace designs reported a 47 percent increase in employee engagement (Toner and Whelan, 2016).
- A recent Harvard study found that office workers performed better on cognitive function tests in buildings with enhanced ventilation rates, equivalent to roughly $6,500 per employee per year in increased productivity (MacNaughton, et al., 2015).
Figure 1: Building versus personnel costs. Figure by Daniel Overbey.
Building vs. Personnel Costs
If one considers the 30-year lifecycle costs of a stand-alone commercial office building, personnel costs significantly outweigh any other building and operational cost at approximately 92 percent of the total. By comparison, the initial building design and construction costs accounted for about 2 percent of the total investment; while operations and maintenance costs amounted to approximately 6 percent (Osso, 1994, Romm, 1994).
It is clear that an investment in people equates to a return on investment.
In a post-pandemic economy, health and wellness should be a significant point of emphasis to attract, nurture, and retain productive personnel. Better indoor environments are a great place to start.
BOMA. "Benchmarking Reports." Experience Exchange Report. BOMA International, 2010.
Bureau of Labor Statistics. “American Time Use Survey.” United States Department of Labor, 2010.
MacNaughton, Piers, James Pegues, Usha Satish, Suresh Santanam, John Spengler, and Joseph Allen. "Economic, Environmental and Health Implications of Enhanced Ventilation in Office Buildings." International Journal of Environmental Research and Public Health, 2015 Nov 18;12(11):14709-22.
Osso, Annette. Sustainable Building Technical Manual. Public Technology, Inc., 1994.
Petrullo, Michael, et al. "The Drive Toward Healthier Buildings 2016: Tactical Intelligence to Transform Building Design and Construction." Dodge Analytics, 2016.
Romm, Joseph J. Lean and Clean Management. Kodansha International, 1994.
Toner, Matt and Julie Whelan. "CoreNet Global and CBRE Corporate Real Estate & Facilities' (CRE&F's) Evolving Role in Supporting Employee Health and Wellness Initiatives Survey." CoreNet Global and CBRE, 2016.