Morbidity and mortality, particularly as a result of HIV/AIDS and malaria, raise the cost of labour to municipalities, through increased absenteeism, lower productivity, higher health care and funeral costs, and the recruitment and training of replacement workers. Disease consequently undermines the efficiency and quality of municipal service provision, and significantly lowers returns on investments in municipal capacity building. These problems become more serious as cities undertake institutional reform programmes to improve the productivity of workers who might then fall ill. Based on research conducted in three East African municipalities—Kampala City Council, Ilala Municipal Council and the City Council of Nairobi—the study develops a simple methodology and modelling tool to evaluate the financial impact of morbidity and mortality on municipal human resources and to estimate the costs and benefits of workplace prevention and treatment programmes. The analysis shows that the cost of HIV/AIDS in the municipal workplace is considerable: on conservative assumptions, the present value cost of a new HIV/AIDS infection is approximately twice the annual salary of an employee, and the annual cost of HIV/AIDS in the workplace is between one and two percent of the municipal wage bill. The preliminary results demonstrate that beyond ethical and moral imperatives to plan and implement programmes to mitigate the impact of disease in the workplace, there is a strong financial imperative to act. Making straightforward assumptions about illness and death in the workplace, the analysis demonstrates that workplace prevention and treatment programs are in most cases profitable investments.