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How Improving Staff Retention can Save You Thousands a Year

Published June 2017

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It might sound obvious, but losing staff is a seriously expensive mistake to be making, especially when those employees are leaving you and heading off to work for one of your competitors. An Oxford Economics study, cited by HR Review revealed that replacing members of staff costs employers an average of around £30,000 per employee. 


Whilst many companies acknowledge that their employees are their greatest asset, very few have active staff retention policies in place to reduce drop out rates. However, with £30,000 per employee at stake, we think it’s certainly worth looking at ways to increase your staff retention rates so that you can start saving your business thousands each year. 

As a specialist provider of team building activities, we regularly get to work with organisations and their employees and can really see the difference between companies with highly engaged and motivated staff and those where there are clear signs of disengagement. So if you’re looking for justification to focus on improving employee engagement within your business or just curious about the costs of recruitment, then please read on: 


Why high staff turnover is so costly:

  • Recruitment Fees: Hiring a recruitment agency and paying their fees is perhaps the most obvious cost of replacing staff. With agencies charging an average of between 15-30% of salary, this cost is not insignificant. This has driven many companies to appoint their own in-house recruiters. However, cost savings associated with recruiting in-house are not as significant as you may think. Jason Collings argues that in-house recruitment costs are typically 8-15% compared to salaries. However, as over 70% of in-house solutions fail to source all, or even 90% of their vacancies themselves, the average cost of in-house recruitment is more realistically around 12-20% of salary.
  • Time Spent Recruiting & Interviewing: One cost that is often overlooked by companies is the loss of business opportunity caused by the recruitment process. For example, the number of hours spent by managers and senior staff in terms of reviewing CVs, attending interviews and generally supporting the recruitment process. These lost hours can seriously impact productivity within the affected departments, which in turn, can impact the company’s bottom line reducing revenue. Jason Collings argues that this cost can amount to over £10,000, when you take into account the loss of opportunity as well as the manager’s time.
  • Staff On-Boarding / Training: Another key cost to recruitment is the loss of skills that occurs when an employee leaves a business. The Chartered Institute of Personnel and Development argues that “the more valuable the employees in question are - for instance where individuals have specialist skills or where they have developed strong relationships with customers - the more damaging the resignation, particularly when they move on to work for competitors.” This leads on to a second cost, the time it takes for new members of staff to get up to speed. The Oxford Economics study, cited by HR Review revealed that: “on average, workers take 28 weeks to reach optimum productivity which has an attached cost of £25,181 per employee.” Making this by far the dominant cost factor for replacing a departing employee. 
  • Costs to Morale and Engagement: High staff turnover can also have a significant impact on those employees who remain. Page Personnel argues that “it lowers internal morale and it could harm an organisation's external reputation and cost it business”. This can lead to further resignations, increased pressure on existing teams and a spiral of disengagement. If you’re worried about disengagement within your team, then our related article ‘How to Manage Change & Motivate Disengaged Employees’ may be a worthwhile read. Alternatively, contact us to find out how a team building event may help you to motivate your staff.

How to improve staff retention rates:

The first step when developing an employee retention strategy is to look at why employees are leaving. According the Chartered Institute of Personnel and Development“Measuring the levels and costs of employee turnover is vital in building the business case for effective recruitment and retention initiatives. These costings can be a powerful tool for winning line manager and board-level support for resourcing activities.”

Obtaining accurate data can be tricky as employees are often reluctant to be honest about their reasons for leaving as many wish to avoid conflict or may need to seek on their employer for a reference. However, Page Personal states that the most common negative reasons for leaving a job include the following, therefore looking critically at these areas is always a good place to start:

  • Poor salary and benefits.
  • A lack of training and development opportunities.
  • Dissatisfaction with management.
  • Not getting along with colleagues.
  • The journey to work.
  • Lack of work/life balance.

One critical way to improve retention rates is to ensure that your employees feel valued and proud of the work that they do. Linda Smith, HR Director of Unum said: “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.” Our related article 'How to Motivate, Reward & Incentivise Your Staff', provides some useful examples of ways you can boost morale within your team. 

If you take care of your employees, they will take care of your customers. Then your customers will be fiercely loyal and keep coming back, ensuring long-term success.

Richard Branson

In summery, the true cost of a high staff turn over is much more than simply the cost of recruiting new employees, its about lost time and opportunity, skills gap and disengagement within your business. As Richard Branson says: “If you take care of your employees, they will take care of your customers. Then your customers will be fiercely loyal and keep coming back, ensuring long-term success.” 


If you’d like to talk to us about employee engagement or would like help organising a team away day or event to reward, motivate or incentivise your staff, please get in touch. We’d love to help you to get the most from your team.



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