What are the real costs of losing staff?

Coping with staff turnover costs

Losing staff can inflict numerous costs for a business. These costs can be both direct and indirect and can wield a substantial influence on productivity, employee morale, and the bottom line profit. Let’s look deeper.

Recruitment Costs

Finding, interviewing, and hiring new employees can be expensive. Costs may include advertising job openings, conducting background checks, and paying for job board subscriptions or recruitment agency fees. With some recruiters charging upwards of 35% of salary, that can be painfully expensive, especially for higher value roles.

Higher salary costs

Quite often, if a role is hard to replace, you end up offering a higher salary than you were previously paying. Or trying to compete with other businesses to attract the right talent in terms of benefits. This can mean higher wage bills and disgruntled existing employees when they see you offering better benefits to new employees, but not bringing them in line.

Training Costs

Fresh new employees require training to get up to speed with their roles. This can involve time and resources to train them or send them to training programs. In some specialist roles this can take several months.

Reduced Productivity

When an employee leaves, there is typically a period of productivity downturn as their workload is redistributed, and the team adjusts to the loss. This can result in missed deadlines, errors, and decreased output.

Overtime and Temporary Staffing

To cover the gap left by the departing employee, businesses may need to pay for overtime or hire temporary staff, which can be costly.

Knowledge and Expertise Loss

Experienced employees often possess valuable institutional knowledge and expertise. This is known as intellectual capital. Losing this can impact the efficiency and quality of work, especially if the departing employee had unique skills or knowledge. This can be particularly damaging to specialist industries, even more so in small business, as these roles can be hard to replace and come at great cost.

Employee Morale

High turnover can negatively affect the morale of remaining staff, leading to lower motivation and potentially more departures. Especially if those in training and mentoring roles move on.

Are staff sitting around delaying the income through lack of motivation?

Recruitment and Onboarding Time

The time it takes to recruit, hire, and onboard a new employee can result in delays in completing projects and achieving business goals.

Customer Satisfaction

Frequent staff turnover can negatively impact relationships with clients and customers, as they may prefer working with familiar faces and be concerned about inconsistent service. Especially if significant exits have a knock on effect. Customers like consistency and personal service. They get to know staff and build relationships. There is a risk that customers will go elsewhere if you lose good staff.

Exit Costs

When employees leave, there may be costs associated with notice pay, unused holiday, and other exit-related expenses. In some cases, if the employee is leaving on bad terms, there may be the risk of significant settlement costs or even the concept of tribunal claims.

Lost Intellectual Property

In some cases, departing employees may take sensitive company information, intellectual property, or trade secrets with them, potentially resulting in security and legal issues. Although there are often contract clauses to prevent this, it can be hard to enforce and difficult to prove. There is also the loss of further innovation and growth for the business when significant roles and experienced people move on.

Cultural Impact

Frequent staff turnover can disrupt the workplace culture and team dynamics, potentially leading to a less cohesive and productive work environment. Teams need to re-align. Even more so if leaders change. People can be highly apprehensive about new managers and change.

Reputational Damage

High turnover rates can damage a company's reputation in the job market, making it more challenging to attract top talent. Things like glassdoor are used for reviews from employees. Negative reviews and frequent social media posts of staff moving on may raise red flags for potential new employees and customers alike.

It's important for organisations to consider these costs and work to reduce turnover by implementing strategies to improve employee retention, such as offering competitive salaries, providing opportunities for career growth, and fostering a positive work environment. Investing in employee satisfaction and development can ultimately save a company money in the long run by reducing the costs associated with losing staff.

Talk to us today about how we can help support employee retention and talent management.

You can also find more blogs on how you can implement changes that make a real difference to retention.