Turn over a new leaf

Add on other hidden costs – such as loss of expertise, reduced productivity, lower morale, the cost of the vacant position, and training a new staff member – and the true cost may be up to three times that amount. Ouch!

Poor staff retention is expensive. With the employment market tightening, never has there been a better time to hone your business’s practices in attracting, engaging and retaining talented staff.

The true costs

The direct costs of replacing a staff member? Think advertising the job vacancy, fees paid to recruitment agencies and consultants for conducting tests on new recruits (such as, reference checks), and termination payouts.

The indirect costs are also hefty. Consider loss of productivity in other employees filling in for the vacant position (estimate one-third of each staff member’s daily remuneration for each day they fill in for), in-house hiring costs (the hourly rate of each employee involved in the process, from reading resumes to carrying out interviews), induction and training of the new recruit (from the hours spent by staff involved to the cost of the training and induction facilities), and termination administration (for example, cancelling computer access).

If the staff member leaves in the early stages of their employment, there is also much productivity loss. New employees work at half the rate of usual productivity, until they get accustomed to their role. So, in working out the costs, estimate the number of days for them to reach 100 per cent productivity and multiply this by 50 per cent of their daily rate.

The productivity of many employees also drops while they are serving out their notice period – from being preoccupied with making arrangements for their new job to taking unused sick leave or other days off they felt owed to them. Estimate this productivity percentage loss based on your observations of past employees.

So, as you can see, whether directly or indirectly, the costs can be enormous.

Tricks for holding onto your staff

What can you do to increase your staff retention – and help your bottom line? There are several work practices that can assist.

One is ensuring thorough search and selection processes when choosing employees, in the first place, to ensure they are the best overall fit for your workplace and their role. Then, there’s providing opportunities for employees to develop in the organisation via career management, coaching and mentoring.

Providing flexible work options is another key practice – understand your employees’ preferred ways of working and reflect this in your workplace’s programs and values.

Financial incentives are another surefire way to keep a hold of your staff – from competitive salaries, based on the market value of the roles, to performance-based rewards.

Finally, management support is also key. Staff retention is ultimately the responsibility of managers and supervisors. So, ensure those you select have the skills and training to effectively support and develop your staff.

Want to add up the cost of your staff turnover? Try these handy online calculators at www.caliper.com.au/en/cost-of-turnover.asp and www.drakeintl.com/au/engage/turnovercost.aspx.