The True Cost Of Implementing Employee Retention Scheme Vs. Employee Replacement
Replacing employees costs more than just their new salary. There are many additional costs to factor into your cost-to-hire calculations, such as time to source, advertise, and interview.
Here we look at the actual cost of employee replacement and discuss the benefits of introducing an employee retention scheme to lower hiring costs, retain your people’s expertise, and ensure your team is happy and motivated.
How Much Are You Spending On Hiring?
There are four significant areas that you will spend on when hiring:
- Recruitment agency costs: A recruitment agency will charge 20-30% of the employee’s final salary as their fee. According to ONS figures, the average full-time wage last year (2020) was £31,461. This places the average recruitment agency costs at £7,865 per hire. Alternatively, you could bring hiring in-house and take a do-it-yourself approach. You could post job ads on LinkedIn, social media, or job boards, with an estimated ad cost of up to £400. However, to hire yourself, you will need internal recruiters and will most likely end up introducing referral rewards.
- Training: The loss of knowledge, know-how, and expertise is an often-overlooked hiring cost. The average new hire requires £1,000 worth of training in their first year of employment.
- HR costs: The hours spent assessing applications, interviewing, setting up new starters, managing software licences, and company cars can be fluid between companies but significant.
- Time: Time is a cost in itself, and according to Glassdoor, the average time to source a replacement employee is four weeks for regular staff, six weeks for managers, and ten weeks for directors.
Improving Employee Retention
The top reasons for employees leaving include:
- Inadequate salary
- Lack of recognition
- Feeling unsupported or overworked
- Few career advancement opportunities
- Dissatisfaction with management or the company culture
- Poor work-life balance
You can improve employee retention by introducing a number of strategies:
- Mentorship: You can keep your employee retention high by pairing career-minded individuals with a mentor, which is especially important for remote or work-from-home positions.
- Wellness benefits: To improve employee retention, you need to keep your workers financially, physically, and mentally fit. To ensure wellness, you will need to consider helping employees with stress management and provide healthcare benefits, employee benefit programs, retirement planning, and educational resources.
- Work-life benefits: The perks employees appreciate most include paid parental leave, flexible working schedules, and the option to work remotely.
- Continuous feedback: One-on-one meetings should be more regular than annually, and place a focus on the individual’s short and long goals, and creating a realistic plan to achieve these.
- Recognition and rewards: Appreciation needs to go beyond salary and bonuses if you are to maintain high employee retention levels. Management needs to thank employees that go the extra mile, and companies can introduce reward systems that incentivise innovation, ideas, or work anniversary milestones.
Your employee retention efforts and activities should not be introduced and forgotten. It would help if you evaluate performance and continually seek out new ways to satisfy your team and beat your employee retention goals.
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