The cost of premature departure

Your recruiting process has worked and you’ve found the perfect candidate. Everyone is delighted: so how do you make sure the enthusiasm continues? It’s an important question because turnover among people in the first two years of a job is much higher than among other groups. The CIPD describes this as ‘premature departure’ while the Society for Human Resource Management refers to it as ‘dysfunctional turnover’. And while not all turnover is negative, swift turnover costs more both financially and in terms of disruption as new employees are brought up to speed.

Estimates of the exact cost of replacing an employee vary: the CIPD calculates the average recruitment cost to be £2,500 per employee, rising to £8,000 for senior managers. But it points out that while around 50% of organisations measure the direct costs of replacing an employee: advertising, agency and assessment centre costs, only 17% factor in the costs of time associated with recruitment, selection, induction and administration. As a result, the cost could be considerably higher. Randstad’s own research estimates the cost to replace a member of staff to be an average of seven months’ salary.

There is also a cost associated with effectiveness. The Oxford Economics’ 2014 report for Unum looked at professional employees and concluded that it takes an average of 28 weeks for a new employee to reach full effectiveness. This ‘bringing up to speed’ cost averages out at £25,181 per employee and forms the bulk of the £30,614 average the research estimates it costs to replace a professional employee. Taking all costs into account, research by PwC put total replacement costs at a year’s salary.

Explanations of high turnover rates include: 

• the job failed to match up to expectations

• poor selection – the successful candidate did not complete the probationary period successfully

• the organisation failed to integrate the newcomer successfully, this includes a poor or non-existent induction process and difficulties integrating the newcomer with the existing team

• failure to connect with the line manager

• some industries, such as hotel, catering and leisure and retail have naturally higher turnover levels as they often employ younger people, e.g. students who aim to move on.