The cost of employee turnover is higher than you may think, clocking in at an estimated £30,614 per vacant position. That’s a relatively conservative estimate, as well, given current labour market conditions. In the context of small and medium businesses, soaking a cost on that scale is nearly unthinkable.
In addition to causing headaches and hassle for your business, replacing employees is a costly endeavour. According to Business News Daily, 33% of employee turnover costs are ‘hard costs’: expenses like temp workers, advertising positions, recruiting fees, and background checks.
The remaining costs? Lost productivity, reputational damage, and more can hurt your business in a big way. From paying for hiring solutions to the impacts of extra strain on the team, the cost of employee turnover extends far beyond the price of onboarding.
This article discusses exactly what makes employee turnover so expensive—and how.
The most immediate and obvious cost of employee turnover is that of the hiring process to bring on employees. According to Glassdoor, the average cost-per-hire runs the average employer about £3,000 per employee—for the hiring processes alone.
Cost-per-hire entails only the expenses you put out to attract, vet, and eventually bring on a new staff member. These costs often include advertising for the position in various forms, such as banners, job posting sites, and pay-per-click ads to attract talent. LinkedIn and other job boards can be helpful tools to draw in job seekers, but higher-level positions may require a more specialised net.
For these specialised positions, cost-per-hire can be significantly higher. Many employers in need of top talent turn to recruitment agencies to headhunt qualified professionals to fill their roles—but top talent comes at top prices. Most recruiters charge as much as 20-30% of the final salary, leaving you with a hefty invoice to replace any specialised staff member you cannot source yourself.
This doesn’t cover the expenses for internal employees’ hourly time spent interviewing, researching, and otherwise vetting your candidates. For owner-operators, the time spent in an interview may feel like a negligible cost. However, hours wasted on the phone and meeting with potential candidates is time away from clients, management, and other more productive tasks you could be taking on to add value to your business.
On top of this, many employers also pay for background checks and drug screenings to further seal the deal on one or more late-stage candidates—all technically “optional” processes that add up.
Once you’ve found an employee, the cost of employee turnover should grind to a halt.
“Should,” being the operative word. In practice, however, this is not the case. Employee onboarding is as costly as it is vital to retaining your workforce and avoiding a cyclical pattern. On the front-end, onboarding costs include the expenses of filing paperwork for insurance, taxes, and payroll. Your HR reps will spend several hours on these tasks for each new hire, and that’s just the beginning.
Hard costs for onboarding also include provisioning new employees with the tools they need to perform their roles. For example, you may need to buy them new equipment or provide a stipend if your office has a “bring your own” model. In other cases, you’ll need to pay IT costs for the old employee’s devices to be reconfigured to accommodate your new hire.
In other cases, such as work-from-home, you’ll also need to pay shipping costs to have the equipment sent to your employee’s home—and this is all in addition to any personal items needed such as uniforms, desk placards, branded apparel, and more.
Onboarding may seem like an area to glaze over—you’ve hired your employee, and they should be able to train under their coworkers and learn on the job. However, ill-constructed onboarding processes are severely detrimental to employee retention. 69% of employees who undergo a highly successful onboarding path—one that orients them to the company, culture, and the information they need to succeed in their position—will stay with their company for at least three years.
To the same effect, though, comprehensive onboarding will cost you. You’ll want to invest in a quality training tract to help explain at least the basics of your brand and likely assign an employee (or two) to assist your new hire in learning their position.
Your new hire will incur time costs from everyone around them while becoming acquainted with the office, as well: From asking questions about daily operations, such as how to use the copier or log on to the WiFi, to needing help correcting learning-curve mistakes, your cost multiple employees hours throughout their onboarding process.