Did you know an Oxford Economics study – Understanding the financial impact of staff turnover February 2014 – found that the average cost of replacing an employee on a salary of £25k+ (in the legal sector) is £39,887? The cost is likely to be the same in other industries.
£35,307 of this originates from lost productivity where new employees are not yet performing at optimal output. Around 60% of this figure is down to revenue not being fully achieved over the early stages of employment, and 40% in lost salary, which is full salary being paid to new employees performing below productivity during the same early period.
The average time a new employee takes to reach optimal productivity is 40 weeks, which varies depending on the origin of the new employee and the role in question.
The report states that “There are more elements to the cost of staff turnover than one might initially anticipate. Firstly, organisations face logistical costs such as advertising the vacant role and hiring temporary staff to cover any gaps. On top of this, businesses will also encounter a period of reduced productivity while new staff take time to reach their peak effectiveness in their new job. It’s easy to underestimate how long it can take to get staff up to their optimum productivity level. In fact we believe that even in this report employers have been optimistic in their estimation of how long this process takes, especially for higher earners in leadership roles. I have found that when moving to a new employer it takes over 11 months to reach peak effectiveness, given the learning curves at more senior levels.“
Smaller firms generally fare better than larger firms as new employees take a shorter time to get up to speed, which is likely attributed to having more exposure to management and receiving faster feedback, however there is evidence smaller firms have lower productivity levels which makes optimal productivity easier to achieve.
Recruitment fees make up a small part of the almost £40k overall costs.
It is estimated that labour turnover in 2013 cost retailers a total of £673m, accounting firms £580m, £805m in Legal, IT/Tech firms £1873m, and media/advertising firms £184m. Relative to the size of the sectors in question though, the impacts are greatest in Legal, IT/Tech and Accounting – turnover costs each of these sectors over 3.5% of their output per year.
A happy employee is more likely to stay put and one source of unhappiness can be a workplace dispute.
So, if employees have a dispute in the workplace it makes sense to use a mediator to try to help them to work better together and communicate better. For a fraction of the cost, a mediator can help with retaining staff and save your business a lot of money.
So if you are interested in mediating please get in touch with ProMediate’s workplace mediators via enquiries@promediate.co.uk