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A report commissioned by Unum has cast a spotlight on the costs of replacing employees. Looking at employees earning in excess of £25,000 within the accounting /legal/ IT/ Media and retail sectors, the report estimates that the total cost of replacing one employee amounts to just over £30,000.
In addition to the standard costs of recruitment, the report has estimated that the average cost in productivity as the new employee gets up to speed to be some £25,000. Interestingly smaller firms have the advantage here as they seem to be able to bring a new employee up to speed far quicker than larger firms. Critically, the report also estimates that in more senior roles it can take eleven months to reach peak effectiveness.
The Unum report makes interesting reading and it is difficult not to draw the conclusion that it is far more effective for businesses to retain their valued employees rather than face the costs of replacement. In his executive summary, Peter O’Donnell, the Unum Chief Executive, says “The most important step organisations should take to reduce these turnover costs is to do everything possible to retain and develop good staff.”
Nowadays salaries alone are not enough and for a business to successfully retain employees requires a rounded package which includes long term employee benefits and a strong company culture which seeks to engage employees in the organisation.