The cost of employee turnover

The cost of hiring employees is determined by a number of variables – with some companies paying as much as $40,000 to bring in a new hire. Hiring costs are generally calculated to include only the direct costs of recruiting, not the indirect ones. The true cost of replacing an employee is believed to be closer to 1.5 times their annual salary.

To help you understand why it’s so expensive to replace a member of staff, we break down the different costs.

And remember, there is nothing quite money-saving and timesaving as streamlining your processes with HR software.

What makes the cost of employee turnover so high?

It’s easy to assume that the cost of replacing employees includes only the obvious, direct costs. But the indirect financial cost often amounts to a much higher sum:

• Advertising a vacancy on sites such as Seek, Indeed or LinkedIn. The cost will depend on the type of advert you choose.

• Subscription costs for recruitment software for posting jobs and screening candidates.

• Outsourcing hiring to a recruitment agency who might charge you around 10-20% of the job’s annual salary.

• You then need to hold interviews, taking time out of current employees’ days and costing the business time and money.

Onboarding and training

Once you’ve paid the average $34,440 cost for a new ANZ candidate, you’ll need to welcome them to your team.

You might put together a welcome pack with their offer letter, copies of their contract, details of company benefits and the employee handbook.

You might want to hold an induction for your new employee. While this won’t cost you much if you do it yourself, you’ll have to give up your own time. Even if it’s just for a few hours, your time is valuable to your business.

And then there’s the cost of training staff in their new role. The amount this will cost will vary depending on the job you’re recruiting for. It might only take a quick chat about how to use the till or involve two-week training on https://www.brighthr.com/au/articles/training-for-your-employees/how to sell over the phone.

Loss of productivity

It will take some time for your new employee to produce the same level of work as the person they replaced. But the amount you’ll be out of pocket will depend on the nature of the job. For example, waiting staff won’t need as much time to get up to speed as a junior lawyer might do.

How can I bring the cost of staff turnover down?

You can look at cutting costs wherever you can. It might be worth looking for a cheaper recruitment agency or shopping around for a more affordable external training package.

But the most effective way to reduce the cost of staff turnover is to make sure your long-serving employees don’t leave.

Each member of staff will want something different from their job. Some employees will want to develop and move up the career ladder, while others will want to work flexibly to achieve a better work-life balance.

You won’t know what your staff want unless you talk to them. Set up a meeting with your employees to ask them what they’d like to change about their job or get them to fill out a survey.

Manage staff turnover and retention with BrightHR

Streamlining your processes with HR software means more spending more time on the things that matter. Including improving your staff retention rates and handling employee turnover challenges. What’s more, with employment relations experts on hand to advise our clients 24/7, you’ll feel supported with any questions or case-by-case concerns you might have as an employer.

To see BrightHR in action book a free demo with our team today or give us a call on 1 300 029 198.