The true cost of losing and replacing a valued employee
All businesses know that turnover is a strong possibility and even loyal employees could easily be swayed by a bigger salary or an exciting, new challenge. Many companies have grown accustomed to losing and re-hiring workers, but turnover needs to be recognised and dealt with irrespective of how high or low it is. While it is expected that some employees will leave, businesses need to realise that finding new staff can be expensive and problematic. There may be plenty of candidates out there who seem capable, but identifying these applicants and settling them into a new work environment can be challenging. A new worker will rarely be as productive as the person they are replacing straight away, as they need to familiarize themselves with their daily duties, build personal relationships, and learn how to manage their workload efficiently. As well as this, rehiring can also prove to be costly, with research from Oxford Economics showing that replacing staff with above average salaries can cost up to £30,000 per employee.
What have we learnt from the Oxford Economics study?
The study, which looked at staff earning over £25,000 in the legal, retail, accountancy, media and advertising, IT and technology sectors, found that staff in large firms took 28 weeks to maximise their productivity. In order to allow staff to reach their optimum performance, more than £25,000 needed to be spent. Oxford School of Economics used two fundamental elements to come up with the findings: the amount of lost wages and lost capital income. It discovered that £13,128 of wages are lost, as much of the money paid to workers in their first days at a company are effectively wasted because they are not operating at their full effectiveness. Some £12,054 was also wasted in lost capital income, with the impact of both factors varying depending on the type of firm assessed. For example, staff at organizations with less than ten workers took just 12 weeks to reach optimum productivity, whereas those at companies with up to 250 members of staff took 24 weeks. On top of this, workers at larger firms spent 28 weeks getting up to speed at their new job. Chief executive officer, Peter O’Donnell of insurer Unum, which commissioned the research, said the study shows a “stark cost implication” for companies. “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,” he added.
Keep staff on board with reward schemes
The best way to tackle the high costs of business turnover are to incentivise staff with reward schemes. There are plenty of ways you can engage staff, improve their morale and boost their performance at the same time. At all times, you should show a real interest in your staff’s career progression, outlining the options they have to increase their pay and responsibilities. Quite often, managers are too busy to properly engage their team, which is why a lot of HR issues materialize. You need to be transparent with all your workers and inform them what they need to do to move up the ranks. Members of your team who are happy in their current role should also be rewarded. For example, in a sales environment, you could perhaps implement a reward for all members of staff who reach their sales targets. The main thing to remember is that rewards need to be tailored to each member of staff. It is unlikely that all workers will want a particular perk, so it is advisable to speak to them individually and identify how they want to be rewarded. There will never be a universally accepted reward and you should not assume you know what your employees will want. Be open to suggestions and ensure your workers are up-to-date with your plans.