Letters of resignation mean only one thing: more work for you. Managing the notice period and the paperwork, ensuring a proper handover, updating the job description, advertising, interviewing, hiring, training. It’s a lot to do and it’s all on top of your day job.
But your time and effort is just the tip of the iceberg. We set out the full cost of employee turnover to your business.
Time Equals Money
When you’re recruiting you’re not earning. Which is why many businesses decide to outsource their recruitment activities to an HR specialist. But how much does it cost to hire a new employee?
Economic modelling experts Oxford Economics ran the figures and found that replacing an employee who earns £25,000 a year will cost your business, on average, a total of £30,500. This figure varies dependent on sector ranging from £20,113 for retailers to £39,887 for legal firms.
How did they get to these figures? By considering the two main costs involved in recruitment:
a. Management time spent recruiting, inducting and administering
b. Paying for advertisements
c. Running assessment centres
d. Overtime or temporary employees to cover the work
Depending on the role and the employee’s wage, the logistical costs vary. Replacing someone who earned £25,000 per year would cost on average £5,433; those on higher salaries would cost more.
a. Inducting a new hire into the organisation
b. Training the new employee
c. Loss of productivity as the new hire gets up to speed
In the retail sector, the lost productivity while a new workers gets up to speed is £25,000 whereas in the legal sector (where the individual’s knowledge is the product) the cost is £35,300.
These numbers are eye-watering. So what can you do to reduce them?
How to Stem the Flow
If you seem to be recruiting more often than you’d like it’s worth assessing your turnover figures and comparing them to industry averages. HR Magazine reported a new high for UK turnover rates of 15.5% in 2016. If yours is above that it could be time for concern.
Before you can take any steps to address your turnover you need to understand why people are leaving. Asking them face-to-face may not elicit the most truthful responses; instead set up an anonymous online exit questionnaire to find out what people really think.
Once you know why people are leaving, you can pull together a plan of action to put things right.
The risk of people leaving is not small. While the Independent reports that happiness in work is at an all-time high, almost half of UK workers plan to look for a new job in 2018. What were the most common reasons for leaving?
● poor management – 49%
● low pay – 40%
● feeling undervalued – 49%
● lack of career progression – 30%
The good news is that all of these issues can be resolved by working with a specialist HR consultant.
Not All Turnover is Bad
It’s worth pointing out that in some cases turnover is a good thing.
If you keep losing poor performers, you may have no cause for concern. Underperformance costs your business in terms of low productivity, high absence and additional management time.
Their departure means you have the opportunity to replace them with someone brilliant. Studies have shown that the top one percent of performers generate ten times the average output of their co-workers and the top five percent more than four times the average.
Of course, this relies on getting your recruitment, onboarding and training spot on which is why it’s worth investing in a specialist recruiter to do the job right first time.
Three Pronged Attack
There are three main steps to address employee turnover and limit the cost to your business:
1. Understand why people are leaving and find ways to resolve these challenges.
2. Invest in your recruitment strategy to employ someone who will hit the ground running; this will reduce the £25,000 of lost productivity that accompanies the average new hire.
3. Hire someone who will fit well with your culture; the longer they stay and the more they produce the quicker they offset your hiring costs and start contributing to the bottom line.
Get these three steps right and you’ll stabilise your team and save a lot of money into the bargain.
If you’d like the support of an experienced HR consultant to reduce your turnover and manage your recruitment, contact Crosse HR on 0330 555 1139 or email at firstname.lastname@example.org.