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More than money: what you need to know about the true cost of recruiting

12/11/2018
Posted by: Lynn Sedgwick

A stable workforce means that things run smoothly and without interruption, so when a staff member leaves it can have a big impact on the rest of the business. Valuable skills and job-specific knowledge that has built up over time disappear with a departing staff member, leaving you in a tricky position to bridge the gap. These practical implications of recruitment can have just as heavy a cost to your company as the financial element.

That’s why we’ve put together this guide to help explain what the true cost of recruiting is to your business. From finances to how attrition rates impact your recruitment, we’ve considered some of the things you may not have thought about when it comes to recruiting.

Recruitment costs: facts and figures

To understand the true cost of recruiting, it’s useful to look at the facts and figures and what costs they refer to. When a staff member leaves, your business could find itself paying for everything from recruitment costs to the wages of temporary staff.

Research carried out by Oxford Economics suggests that it costs more than £30,000 to replace a staff member. Two main reasons for this cost are highlighted in the findings:

  • Firstly, the logistics of recruiting a new staff member and the associated costs that go along with that. For example, HR activity and the cost to the business of the interview process.
  • Secondly, the reduction in productivity while the new staff member gets up to speed. According to the report, it can take between 20 and 32 weeks for a new starter to reach optimum efficiency, depending on the industry.

The financial figures are striking of course, although it’s important not to overlook the bigger picture. Not only does a departing staff member result in a monetary cost to the business there is a range of knock-on effects:

  • HR spends considerable time going through leaving and joining processes, completing all the relevant paperwork as well as sourcing a replacement.
  • Management has to spend time arranging for the work to be covered, either by distributing it amongst existing staff or appointing temporary cover. There’s also the time spent away from everyday work conducting interviews to take into account.
  • The workload of colleagues increases and there is a general reduction in productivity as staff take time to readjust and the new person to settle in.

Not only is this expensive, it’s time-consuming: resources which could be used to retain staff are instead spent on finding a replacement. There’s the commercial element to consider also, as time and energy are put into recruitment which could be put to more effective use by serving clients, refining work processes, and developing new products and services.

Attrition rates and their impact on recruitment costs

Losing a well-established member of staff is undoubtedly a blow to your business, although it’s equally important to consider how attrition rates play into your overall recruitment costs. If you find that you hire someone only for them to leave after a short while, or if staff aren’t sticking with you for the long term, it can have a huge impact on your overall cost of recruitment. What’s more, if staff churn is causing disruption, then it’s unlikely that your workforce is operating at maximum productivity.

There’s a mixed picture on attrition across the board, with turnover rates varying by profession and industry. Research carried out by XpertHR shows that general management and admin staff has one of the lowest turnover rates at 3.1%. The second and third lowest rates were engineers at 4.9% and technology staff at 6.8%. At the other end of the scale, the highest turnover rates are amongst publishing and events staff at 17.7%.

Each individual industry faces its own specific challenges, however it’s important to remember that each departing staff member impacts on your business. So, while the turnover rate for engineers at 4.9% seems low compared to the 17.7% average staff turnover in publishing and events, it doesn’t necessarily lessen the impact. The need to source candidates with specific skills and qualifications can take a long time, which extends the period that you’re without a valuable individual and means that the optimum productivity of your workforce is reduced for longer.

Each individual industry faces its own specific challenges, however it’s important to remember that each departing staff member impacts on your business. So, while the turnover rate for engineers at 4.9% seems low compared to the 17.7% average staff turnover in publishing and events, it doesn’t necessarily lessen the impact. The need to source candidates with specific skills and qualifications can take a long time, which extends the period that you’re without a valuable individual and means that the optimum productivity of your workforce is reduced for longer.

And while positions such as general admin may have a lower skills threshold than engineering, making them easier to fill, staff churn is disruptive. Having a plan in place to attract and retain the best talent is always a good idea, and if you find that your turnover rates are starting to creep up it’s worth revisiting your employer branding. Perhaps something is missing, or not connecting with staff and candidates and a few small changes could reduce turnover. The important thing is to monitor and refine: stick with what works and change what doesn’t.

Why businesses benefit from using a recruitment agency

Knowing what will attract candidates, what will drive them away and what will help to keep employees is invaluable. And especially when it comes to attracting candidates in a specialist field, having the experience and know-how of a recruitment agency on your side can make a big difference.

Of course, using a recruitment agency rather than recruiting in-house incurs a cost. However, by making use of a partner with specialist skills, your staff are free to do what they do best, meaning that you save time and money in the long term. Placing the right candidate with your firm will also reduce attrition rates, meaning you spend less on recruitment than you otherwise would have done.

A recruitment agency will be able to personalise their service to the needs of your business, so you can choose exactly the level of involvement that suits you. What’s more, an extensive network of candidates will mean that your agent can think outside of the box and help you to consider candidates that you might not otherwise have done, giving you more choice.

If the true cost of recruitment is proving to be an issue for your business, perhaps we can help? Even if staff retention is something that your company has been struggling with why not give us a call on 01772 259 121? We’ve over thirty years’ recruitment experience and would be pleased to help.

You may also find out recent blog ‘Staff retention – worth the effort?’, of interest if you’re looking for some new ideas on how to retain your staff.

And please feel free to register your vacancy online, if you’re looking to recruit at the moment.

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