Oxford economics carried out a report that considered the cost implications of staff turnover across five diverse sectors: Retail, Legal, Accountancy, Media & Advertising and IT & Tech. Their findings revealed that replacing a member of staff can potentially cost a business in the region of £30,614.
The Chartered Institute of Personal Development (CIPD) has reported that while this figure may startle many business owners and directors, the majority of employers do not calculate the specific costs of employee turnover and the overheads related to this ‘churn’ beyond the act of actually appointing a new person.
This often leads to recommendations from experts that businesses should carefully monitor retention rates and reduce staff turnover to a minimum.
Read on to find out:
The cost of hiring a new employee goes beyond the advertising, interviewing, screening, and hiring process. Employers need to consider the added monetary outlays of on-boarding a new employee as well as any training and management time that is required.
On average businesses spend £5,433 on the associated logistical costs of hiring, with various activities contributing, including temporary cover (averaging at £3,618), interview time (averaging £767), recruitment agency fees (averaging £454) and advertising and HR resource time (averaging £492).
Aside from the physical expenses, employers should be prepared to see a drop in productivity during the transition period. This can vary depending on industry, managerial support, induction training, the seniority of the role and the experience and aptitude of the new recruit.
The same research has shown that on average new employees within small and medium sized enterprises (typically sub 250 employees) take 6 months to reach target efficiency, compared to 7 months within larger businesses with over 250 workers. The same report also notes that while optimum productivity can be reached inside of 24-28 weeks, it can very often take a new employee up to two full years to reach a comparable output as an existing member of staff.
The knock-on effect of staff turnover can also result in disengagement and a productivity dip amongst other employees. While some staff turnover is inevitable, businesses ought to monitor whether their employees are feeling disengaged with the business and their day to day duties regularly, although more so following periods of increased staff ‘churn’.
Penny Loveless, director of Pecan Partnership, which has designed change programs for NatWest, Getty Images, Britannia Building Society and GlaxoSmithKline says: ‘…engagement is a cultural matter. Leaders create the conditions for engagement. It is down to the determination of leaders to go beyond the point at which employees appear to be content’.