Reducing Employee Turnover and saving millions of pounds in costs
The cost of losing an employee can be quite substantial for an organisation. Here are the main costs associated with employee turnover:
Recruitment costs - The costs of advertising, interviewing, hiring, and onboarding a new employee can be expensive. Estimates range from one-half to two times the employee's annual salary. Average cost of sourcing a candidate via a UK Recruitment agency is typically around £3,000 per employee, which they base on a fee of 20-30% of the average salary of an employee₁. According to the Office for National Statistics (ONS), the mean national average salary in 2021 was £38,131 for a full-time employee and £13,549 for a part-time role. Assuming a company has 1,000 employees and average staff turnover of 35%₂ (UK) that would be a cost of £1 Million per year!
Training costs - New employees require training to learn the job and get up to speed. While this is happening, their productivity is lower. Plus, existing employees spend time away from their work to help with training. Whether you deliver it in-house or have an outside company come in and do it, the average cost to a UK business of training new employees is £1,068 per employee. Based on the average turnover, per 1,000 employees, that’s another c.£374,000 on the bottom line!᷾₃
Lost productivity - When an employee leaves, their work still needs to get done. This can mean coworkers have to pick up the slack, managers have to spend more time reviewing work, or projects get delayed. All of this results in lost productivity.
Lost knowledge and expertise - When long-tenured employees leave, they take years of institutional knowledge and expertise with them. Other employees will have gaps in knowledge that can impact service quality and productivity.
Lower morale - Turnover can cause instability in a team and negatively impact workplace culture. Seeing coworkers leave can reduce morale and engagement among remaining employees. According to Gallup, the results are worth it. Gallup's most recent employee engagement meta-analysis of 112,312 business units found that teams scoring in the top quartile on employee engagement saw the following benefits compared with bottom-quartile teams:
10% higher customer loyalty/engagement
23% higher profitability
18% higher productivity (sales)
14% higher productivity (production records and evaluations)
18% lower turnover for high-turnover organisations (those with more than 40% annualised turnover)
43% lower turnover for low-turnover organisations (those with 40% or lower annualised turnover)₄
Customer service disruptions - Employees build relationships with customers over time. Losing an employee means starting over with those client relationships. This can lead to decreased customer satisfaction.
Hiring costs - In addition to recruitment costs, there are also costs of temporarily filling the role, overtime paid to cover work, and time spent interviewing candidates.
Overall, based on the calculations above, it's estimated that turnover costs can range from 90% to 200% of the departing employee's annual salary. That's why focusing on retention is well worth the investment for organisations.
To combat this in your organisation, speak with our team today to save millions of pounds in costs and retain you best talent.