Counting the cost of an employee being unwell

Small businesses suffer proportionately a lot more when employees are ill.

For small and medium-sized enterprises (SMEs) those businesses with fewer than 250 employees - the pressure to do more with less has never been greater.

Tight margins, limited resources and lean teams mean that when someone is off sick - whether due to physical or mental illness – it can have a disproportionately high impact and drive-up hidden costs.

Yet many businesses still don’t realise just how much poor health is costing them.

Unum, partnered with YouGov to survey over 2,000 SME decision-makers across the UK and the findings reveal a stark reality. The median cost of employee sickness for SMEs is now £27,964 per year - equivalent to 1.7% of average total turnover in 2024/2025.

Across the SME population in the UK, this represents £28.9 billion per year in lost output. Those numbers are not just a ‘wellbeing issue,’ but a real business risk.

The big picture: why long-term sickness matters

This challenge is not confined to individual businesses and represents a bigger national issue. According to the Office for National Statistics, individuals classified as long-term sick now account for 31% of the UK’s economically inactive population - the highest proportion ever recorded.

This sharp rise has profound implications for employers and means that early intervention is more critical than ever.

The longer someone is away from work, the greater the cost for employers. This includes lost output, recruitment and training costs. Investing in wellbeing isn’t just about supporting people while they’re at work, it’s about creating the conditions that help them stay in work, avoid long-term absence and remain happy, healthy and productive.

Mental health: the leading cause of absence

Mental health is now the primary driver of employee absence. However, over a third of managers are reluctant to talk about it for fear of saying the wrong thing. That hesitation can lead to real consequences.

When mental health issues go unaddressed, this increases the risk of long-term sickness and economic inactivity.

According to the Keep Britain Working review, individuals out of work for less than a year are nearly five times more likely to return than those who have been out longer. Unum’s own data reinforces this urgency.

In 2024, mental health-related conditions accounted for 42% of our rehabilitation referrals. With our support, 97% of these individuals were able to recover and either return to work or reach an agreed outcome.

Group Income Protection can play a vital role here – not just in financial support during absence, but by enabling access to vocational rehabilitation, clinical guidance, manager training and tailored return-to-work plans.

These services help employees recover in a way that is sustainable and aligned with their role, while helping employers manage absence more effectively.

Rethinking budgeting for wellbeing

Despite growing awareness of the link between wellbeing and business performance, investment among SMEs remains inconsistent. Over a quarter (27%) still have no dedicated wellbeing budget at all. Among micro businesses with fewer than 10 employees, this rises to nearly half (47%).

This level of investment is out of step with the scale of the challenge. Too often, wellbeing is treated reactively and addressed only when someone is already off sick or when engagement dips. By then, it’s too late.

Many employers recognise the importance of wellbeing, yet may underestimate its financial implications or struggle to make the case for greater investment.

This presents a clear opportunity for a mindset shift. Wellbeing should be embedded into the fabric and culture of how we work, not bolted on as an afterthought. That means rethinking how to train managers, how to design benefit strategies and how to measure success.

By reallocating even a modest increase in budget toward targeted, preventative support - such as offering a health cash plan, mental health resources and manager training - SMEs can reduce absence, improve productivity and protect their bottom line.

Ultimately, health and business performance are deeply interconnected. When employees are unwell, businesses lose money. When businesses invest in health, they gain resilience, loyalty and results.

In fact, 80% of workers say they’re more productive when they feel happy and healthy, so early intervention is not just good practice, it’s a strategic investment in reducing long-term cost exposure.

HR and reward leaders have a unique opportunity to reframe wellbeing not as a cost centre, but as a strategic enabler.

That means moving beyond awareness to action and connecting health to business outcomes. And it means asking the hard questions: Is your business counting the cost of an employee being unwell? And if you are, what are you doing about it?