To say that COVID-19 has posed a complex challenge to business owners is an understatement, to say the least. Recent government statistics estimate that nearly 9 million workers have been furloughed, whereas other sectors have made the hard decision to cut staff. In June 2019, The Guardian reported job losses across some of the UK’s foremost companies. Sectors which have taken a substantial hit include the aviation, automotive, and retail sectors.
While choices were certainly limited by circumstance, the overwhelming majority of companies opted for retention over growth. Once we return to some semblance of normality, we can start looking to the future. However, we must also start preparing for the incoming wave of people seeking employment, the size of which few could have predicted. With multiple industries having suffered significant losses, hospitality being a prime example, many people will be looking to transfer their existing skills to new roles.
At a time when businesses are still picking up the pieces, we must ask whether they are financially prepared for this incoming wave of applicants? This article will discuss the financial implications of either opening the doors to eager jobseekers or focusing on staff retention.
Cost of retaining employees vs Hiring new staff
The choice of retention or recruitment ultimately comes down to cost. Most companies will be bringing former and furloughed employees back into the fold. This shows an admirable sense of loyalty to their staff, both past and present. But ultimately, it’s been consistently proven that staff retention is more cost-effective than recruiting new employees.
With money in short supply, firms must consider not only the costs of recruitment agencies and tools, but also the myriad of costs associated with bad hiring decisions. According to Oleeo, businesses with less than 250 employees lose on average about 39% of new hires within six months. With this level of churn rate, plus recruitment costs, SMEs are spending over £125,000 on ‘failed recruitment’ per year.
This statistic is even more alarming given the post-COVID hiring landscape. Realistically speaking, there will be some applicants who are unsuitable for the role but simply want the financial security. And who can blame them? But, by hiring them you run the risk of two things: hiring someone for a position they’re not suited for, or hiring someone only for them to jump ship when a ‘real’ opportunity comes along. It’s an unfortunate scenario, but a real one nonetheless.
According to a 2018 survey, 39% of hiring managers realised they’d made the wrong decision within two weeks of their new hires starting.
This alone makes a compelling case for staff retention over recruitment. We must also consider training and onboarding costs, as well as staff ramp up time. Training is an investment in your staff, and therefore your company’s growth. However, in 2012 Allied HR estimated that it can take up to eight months for a new hire to get fully up to speed. With that in mind, training resources could potentially be better allocated to upskilling your current workforce.
Research conducted by ClearCompany showed that 68% of staff think training and development is a company’s most important policy. While cost reduction is high on the agenda for all businesses at this time, nurturing your staff’s continued development is just one of many ways you can hope to hold onto your top performers.
How to retain staff post-COVID
Although job security is top priority for many people, some may take the opportunity post-COVID to jump ship. This could be for a variety of reasons. Has their time spent working from home (or on furlough) given them pause for reflection? Could your employees have been unhappy with your company’s approach to handling COVID-19?
If you’re concerned about retention, you should take swift and immediate action. This will lower the chances of a mass exodus once things start returning to normal. So how can you ensure your best and brightest stick around?
Don’t reduce pay unless it’s a last resort
With all the talk surrounding costs and resources, it’s important to remember that your staff are people, all of whom will be concerned about the financial impact of COVID-19. Unfortunately, when it comes to caring for staff, there will be companies who pay lip service to this idea but then cut wages at the first opportunity. By committing to maintaining wages as best as you can, you’ll show your team that you are prepared to walk the walk.
Try to keep your commitments
It’s likely that a lot of your plans were scuppered when coronavirus hit. This could have included, for instance, rewarding standout employees with a promotion or pay rise. Of course, hardly anyone could have seen all of this coming. Therefore, we’re sure your team will understand you having to put a few things on ice. However, you should always try to honour your promises where possible. This will not only prove your commitment to your team, but it will also boost morale by showing that you’re still looking to the future.
Watch for signs of an unhappy employee
People often start thinking about leaving long before they actually do. A lot of the signs can be detected relatively early. For example, is a member of your team taking longer to reply to calls or emails? Do they seem to be distancing themselves from the rest of the team? Has their attention to detail slipped? These are all potential indicators that an employee might soon be saying their goodbyes.
Many managers must accept the fact that their top performers aren’t going to stick around until they retire. That doesn’t mean that you can’t have a sincere conversation about your concerns. You definitely don’t want to jump the gun by asking an employee if they’re thinking about leaving. Instead, ask for their frank and honest opinion. They may not necessarily be unhappy with the job, so hear them out. If an employee thinks you could improve as a manager, be understanding and try not to get defensive or control the conversation. Finally, it could be that their personal circumstances have changed, and you can no longer offer them what they need. If this is the case, then by all means offer any support you can. However, you may have to accept that this job is no longer the right one for them.
While we’ve extolled the virtues of staff retention throughout this article, COVID-19 will have resulted in critical skills gaps across a range of companies. For these companies, there may be no other option other than hiring new recruits. It is imperative that these companies get hiring decisions right the first time around.
This is where our anonymous recruitment platform can be of great assistance. By using data-driven blind hiring techniques, companies will employ only those who are the best fit for the job and are more likely to stick around long term. In fact, a higher post-1 year retention achieved using Applied can save organisations over £5000 (on an employee salaried at £40,000). Interested in finding out more? Request a free demo of the Applied platform today.