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The Bottom Line: Employee Happiness is Good for Business

For employers, creating a work culture that fosters employee happiness can have real, measurable impact on your business and your bottom line.

Sasha Butkovich headshot November 2017
Sasha Butkovich
Dec 12, 20175 minutes
Happy employees laugh together

Happiness is a worthwhile goal for anyone. Who doesn’t want to feel good? And in fact, there are benefits to happiness that go beyond the warm and fuzzies. Happy people spread positivity into other facets of life — including their workplaces.

Employee happiness is becoming a key consideration of modern work life. It’s important to employees, and should be crucial to employers as well. Companies that create happy workforces through tactics like offering benefits and volunteering often see higher productivity and higher retention.

In other words, when employees are happy, everyone wins. And it’s not just a hypothesis — several studies back up these claims. One study found that happy people were 12% more productive.

Why Employee Happiness Matters

Happy Employees Are More Productive

A frequently cited study from 2015 conducted an experiment to measure the productivity of happy people. To do this, the researchers made one group of individuals happier, either by having them watch a short comedy clip or by giving them drinks and snacks. After confirming that these subjects did in fact feel happier, the happy group and the control group had to complete some timed tasks.

The experiment showed that productivity among the happy group increased by an average of 12%, and reached as high as 20% above the control group.

But how does happiness lead to productivity? An IZA World of Labor study on happy employees found that a positive mood induces subjects to spend more of their time in more creative tasks. In addition, the researchers gathered data from other studies found that positive emotions improve performance.

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That productivity can really add up. A Forbes article on employee happiness cited a study that found “when looking at Fortune's '100 Best Companies to Work For' stock prices rose an average of 14% per year from 1998-2005, compared to 6% for the overall market."

These are some pretty staggering numbers. Just think of what your company could achieve if everyone was 12% more productive.

Happiness Helps with Retention

Not only do happy employees tend to be more productive and engaged workers, they also tend to be more loyal. An employee’s commitment to a company is linked to the culture of the organization and how it makes them feel.

According to a Hays study, 47% of people actively looking for new positions say company culture is the main reason. And employee turnover is costly.

The Center for American Progress found that companies can spend anywhere from 16% to 213% of an employee's salary to cover the costs of finding a replacement. Keeping employees happy saves businesses two important resources: money and time.

How to Cultivate Employee Happiness

Clearly, employee happiness has big benefits for your business. That’s all well and good, but where do you get started? A competitive salary is great, but increasingly people are looking for a more holistic offering from employers. Money isn’t the only motivating factor. In fact, some people are willing to take less pay in exchange for better benefits and perks.


A Fractl study asked people if they would give “heavy consideration” or “some consideration” to certain benefits when choosing between a high-paying job and a lower-paying job with better benefits. Respondents ranked better health, dental, and vision insurance at the top of their wish list, with 88% saying they would consider a lower paying job if it offered those benefits. Not far behind, people also ranked more flexible hours and more vacation time highly.

To back up those numbers, the 2017 Aflac Happiness Report found that 72% of small business employees say that an improvement in benefits offerings would make them a happier employee.

If you aren’t offering robust benefits to your employees already, it may be time to explore your options. Not only can this give you a competitive edge in recruiting top talent, it will help to keep them happy once they’re on board. While benefits may seem out of reach for small businesses owners, keep in mind that PEOs like Justworks can help with exactly that.


Beyond benefits like health insurance, employers can utilize other tactics to foster employee happiness. Building a work culture that shows your employees that their happiness is important is a crucial step.

According to a Report Linker survey, 78% of employees who say their company encourages creativity and innovation said they are highly committed to their employer. They also found that among employees who said management helps them fulfill their professional challenges, 83% are highly committed to their employer.

In addition to these more structural and managerial strategies to company culture, there are tons of fun activities that can help create a happy workforce. Team bonding exercises build community and happiness among coworkers. As an added bonus, many team bonding activities cost basically nothing to try.

Organizing volunteer opportunities with your coworkers is a great way for people to engage with the community, bond with each other, and feel happier. A study in the UK on employee volunteering found that a whopping 75% of millennials consider the potential to contribute to society when choosing an employer. The study also found that employees who have volunteered with their company are 13% happier than those who haven’t.

Of course, these are just some broad ideas to generate employee happiness, but don’t stop there! There are countless ways, big and small, to foster a happy company culture.

For inspiration, check out a few of our other blog posts: