A significant factor that impacts not just the bottom line, but also business performance and customer engagement, is employee turnover. The underlying reasons could either be professional or personal; poor performance, job dissatisfaction, an unforeseen situation like a relocation or simply because of employee demotivation within the current role.
According to an Oxford Economics report, the average cost of replacing a departing employee is £30,614. This figure comes mostly from the loss of productivity caused by the time needed for a new employee to get up to speed in their role, which takes an average of 28 weeks across the board. This period of lost productivity has an attached average cost of £25,181 per employee.
The Society for Human Resource Management (SHRM), predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making £40,000 a year, that’s £20,000 to £30,000 in recruiting and training expenses.
Turnover also varies between industries, professions, regions, countries and political conditions. According to monster.co.uk, retail, catering, construction, call centres and media are among the sectors with the highest levels of turnover. On the other hand, sectors with lower turnover rates include the public sector, education and accountancy.
According to a Glassdoor survey in 2018, the average cost of employee turnover, based on the average UK salary, is around £11,000 per person. The cost to replace a senior staff member can be anything between £40,000 – £100,000.
However, a normal turnover is vital for a company. It prevents employee stagnation and demotivation and empowers a fresh and natural labour flow. For top performers, managerial positions or specialists, a high level of turnover is troubling and costly. Furthermore, all new hires need time to train and adapt to the company’s culture before they reach their full potential.
One of the most challenging industries, in terms of high labour turnover, coupled with demanding profit margins, is the private security services sector.
Roles vary within the sector, from maritime security and transit cash processors to consultants, investigators and security dog handlers. The skills and specialisations needed may include foreign languages, being in good physical condition and having the related training. Sourcing new employees is a real headache for recruiters who are struggling to reduce the critical turnover.
The monetary impact of an employee leaving, based on shorthand formulas and sources, is between 30% and 400% of their annual salary. However, the accurate cost of employee turnover is determined by a combination of various parameters. These include their current pay and performance, the workload that needs to be delegated to other colleagues plus recruiting and training.
Below is a scenario that includes the turnover cost estimation, as well as the possible savings and benefits arising from implementing a solution that will decrease the turnover rate. The scenario is calculated using a workforce of 150 employees and an annual turnover rate of 32%.
Based on the above, the savings that could arise for a company, by reducing the turnover rate even by a small percentage, are significant and quite extraordinary.
The question that emerges naturally is: “How is it possible to reduce employee turnover?”
There are some apparent retention tactics for every company, such as a more attractive remuneration package for employees, even as a counter-offer when they have handed in their notice. Another tactic that works proactively and has long-term benefits is providing employees with opportunities to develop in their roles and advance their careers. Employers with a healthy turnover would do well to amend working conditions and cultivate a teambuilding philosophy to help employees enhance their interpersonal relationships and their sense of belonging.
One of the most fundamental ways to retain your employees is by rewarding them. Benefits and pensions are great tools for keeping staff and preventing them from seeking new career opportunities elsewhere. Offer your employees an attractive work package that upgrades their lifestyle, engages and motivates them and, consequently, reduce your turnover.
Centralus offers a targeted solution to the private security sector for the ultimate competitive advantage: an engaging workplace that retains top talent and reduces turnover rates. By joining our community, companies gain access to an array of blue-chip benefits for employees including 24/7 access to doctors, a confidential helpline and discounts on shopping, travel and leisure. We also provide workplace pensions so employees can secure themselves a flexible and rewarding retirement plan.