The research found replacing an employee with a salary of £25,000 upwards in the legal, retail, accountancy, media & advertising and IT & tech sectors costs an average of £30,614.
Lost output a company experiences during the period of time the new worker is getting up to speed costs around £25,181, with the average worker taking 28 weeks to reach optimum productivity.
Advertising costs, agency fees and time spent interviewing prospective candidates costs businesses an average of £5,433 per employee, according to the research, which was sponsored by Unum. This cost is broken down into £3,618 spent on hiring a temporary replacement before the new worker starts, £767 on management time interviewing candidates, £454 on recruitment agency fees, £398 on advertising the new role and £196 on the HR costs of processing the replacement.
The report calculated the overall financial impact of staff turnover across the five sectors analysed at £4.13bn per year, and identified significant differences in staff replacement costs in different types of organisation.
On average new employees in SMEs of less than 250 workers take 24 weeks to reach optimum productivity, compared to 28 weeks for large firms with over 250 workers. Microbusinesses with between one and nine workers reach optimum productivity at just 12 weeks.
The report analysed the cost implication of staff turnover in five different sectors: Retail, Legal, Accountancy, Media & Advertising and IT & Tech. Differences between the sectors are revealed in the table below. These can partly be attributed to the varying salaries for each sector, but are also driven by the different periods workers take to get to optimum productivity.
New workers joining from the same sector reach optimum productivity in 15 weeks while those joining from another sector spend 32 weeks reaching optimum productivity. New graduates spend 40 weeks and those coming from unemployment or inactivity spend 52 weeks reaching optimum productivity.
Unum chief executive Peter O’Donnell says: “This report reveals a stark cost implication for businesses dealing with staff turnover. While the logistical cost of replacing an employee will probably come as no surprise to businesses, the financial impact of having replacement workers learn the ropes is probably a cost that businesses have not before considered.
£30,614 is a startling amount, and I would encourage businesses to place more emphasis on retaining talent and developing good staff to reduce the cost of staff turnover. Put simply, people stay with companies that demonstrate they value – and care for – their employees. For businesses trying to do this, financial reward is not always the answer – we know that staff increasingly value long-term employee benefits such as Income Protection so they should look at their entire benefits offering to help them keep their best people.”
“The variation in cost implications of staff turnover emphasises that it is possible to reduce these costs. It is particularly interesting to see smaller companies leading the way in keeping the cost of staff turnover low. Larger companies should take note of what SMEs are doing to accelerate the learning curve of new joiners, and see if they can adopt elements of their approach of bringing staff up to speed more rapidly to deliver significant financial savings.”
|Sector||Time taken to Optimum Productivity (weeks)||Cost per replacement employee(£)||Overall annual cost to the sector(£)|
IT & Tech
Media & Advertising