What would you do with £30K? Buy a luxury sports car? Put down a deposit for a house? Replace a member of staff who’s left?
Yes, you’ve read that right. According to research by Oxford Economics and Unum, the average cost of turnover per employee (earning £25,000 a year or more) is £30,614.
That means if you replace three employees on this wage in one year, the cost of employee turnover will be close to £92,000.
To help you understand why it’s so expensive to replace a member of staff, we break down the different costs.
What makes the cost of employee turnover so high?
The research states that you’ll spend an average of £5,433 on finding a replacement. Let’s take a look at the charges you might face.
It’s not cheap to advertise a new job role, especially if you want the right candidate to see it.
You might use a recruitment agency who’ll charge you around 10-20% of the job’s annual salary. But remember, you only need to pay this if you hire someone that the agency puts forward.
Alternatively, you could place a job advert online. The cost will depend on the type of advert you choose. It will cost you £130 to post a 30-day advert on Monster, whereas on Reed you can get a six-week job advertisement for £79.
You then need to hold interviews. This will cost you around £1,000 for each employee you want to replace, according to Oxford Economics and Unum.
Onboarding and training
Once you’ve found the right candidate, you’ll need to welcome them to your team.
You might put together a welcome pack with their offer letter, copies of their contract, details of company benefits and the employee handbook.
They won’t cost much to make for one employee but it’ll soon add up if you need to make them often.
You might want to hold an induction for your new employee. While this won’t cost you much if you do it yourself, you’ll have to give up your own time. Even if it’s just for a few hours, your time is valuable to your business.
And then there’s the cost of training staff in their new role. The amount this will cost will vary depending on the job you’re recruiting for. It might only take a quick chat about how to use the till or involve two-week training on how to sell over the phone.
Loss of productivity
It will take some time for your new employee to produce the same level of work as the person they replaced.
To be precise, Oxford Economics and Unum say that, on average, it takes 28 weeks and it’ll cost you £25,182 for loss of productivity.
But the amount you’ll be out of pocket will depend on the nature of the job. For example, waiting staff won’t need as much time to get up to speed as a junior lawyer might do.
How can I bring the cost of staff turnover down?
You can look at cutting costs wherever you can. It might be worth looking for a cheaper recruitment agency or shopping around for a more affordable external training package.
But the most effective way to reduce the cost of staff turnover is to make sure your long-serving employees don’t leave.
Each member of staff will want something different from their job. Some employees will want to develop and move up the career ladder, while others will want to work flexibly to achieve a better work-life balance.
You won’t know what your staff want unless you talk to them. Set up a meeting with your employees to ask them what they’d like to change about their job or get them to fill out a survey.
Get more tips on how to improve employee and staff retention.