Whatever the reasons for someone leaving your company, it’s rarely a good thing. Whether they didn’t get along with colleagues, struggled with the work, or just found the role wasn’t for them, having an employee throw in the towel is hard to take. And it gets even harder when you realise how much money it costs. In this post, we shed light on the real cost of employee turnover, and how you can reduce it.
Putting a price on churn…
There are various ways of calculating the cost of employee turnover. Whilst there are some useful formulae (many of which resemble something written on the blackboards of CERN), it’s better to think about it in more general terms. Quite simply, the direct cost of an employee leaving is the cost to replace them. What does this mean exactly? Well, the costs associated with advertising the role, going through the hiring process, and on-boarding/training the sub to a point at which they start to generate revenue.
The exact amount depends on how you go about hiring and the nature of the position you’re recruiting for. To give you a ballpark figure, Oxford Economics estimates the financial impact of an employee leaving as £30,614 (for individuals earning over £25,000 a year in the IT, Accounting, Legal, Media, or Retail sectors). For senior or more specialist positions, this final figure can be substantially higher.
Collateral – The indirect costs of employee turnover
And it’s not just the cost of replacing an employee that hits your pocket – there are a number of less obvious, indirect factors to consider, such as:
- The temporary costs to cover duties – If you don’t have a new hire to take on right away, then someone else is going to have to pick up the slack. This means either adding to the workload of an existing member of the team (potentially stressful, and taking time away from their own responsibilities) or hiring a temp (expensive). Either way, covering the role in the short term is a drain on your budget.
- Lost knowledge – The departing employee may be taking valuable business knowledge with them. Without their know-how, built up over their time with your organisation, productivity will see a temporary dip.
- The domino effect – When one person leaves an organisation, it can often spur others to do the same. The result is a downward spiral – as more people leave, individual workloads increase. This then leads to higher stress levels, which in turn prompts yet more people to hand in their notices. Before you know it, you’re left with a skeleton team and struggling to meet your targets.
Turning the tide
If your team of staff is dwindling, you’ve got to take action before the situation becomes unsalvageable. Implementing key strategies to retain staff will help you avoid all the hassle and extra costs of employee turnover. Here are the main ones to bear in mind:
- Get your hiring right – Staff churn rate is often a telltale sign that people aren’t being hired for the right positions. If you suspect this is the case, it’s time to re-evaluate your hiring methods. A big part of this is the extent to which you’re actually making decisions based on skills and merit. By basing your hiring process on ability rather than their CV (which, by the way, is no measure of anything important) or arbitrary aspects of their character, you’re much more likely to hire a candidate that’s in for the long run.
- Be clear about salaries – One of the main reasons that people leave a job is dissatisfaction with their salary. Be honest and up-front about how much you’re willing to pay your staff, and any future pay increases.
- Improve company culture – According to the UK government’s Health and Safety Executive, over 600,000 workers suffered from work-related stress and anxiety in 2018/19. If left unchecked, these can lead to feelings of burnout and employees leaving their positions. To combat this increasing trend in the UK, implement real measures aimed at improving work/life balance – flexible working hours can do wonders as can free gym memberships and company allotments.
- Invest in training – Development opportunities are incredibly important to today’s workforce, and failure to provide them could spur an exodus. In the words of the rich Noel Edmunds (Richard Branson), ‘Train people well enough so they can leave, treat them well enough so they don’t want to’.
If you want to decrease your employee turnover (and the associated costs!), then start by sorting out your hiring process. Applied use a data-centric that cuts out unconscious bias and helps you to concentrate on the useful stuff, raw ability. Request a free demo to see how it works.