So what does recruitment really cost?

I’m often surprised at how many employers completely underestimate the cost of replacing staff.

Many Human Resources professionals consider the cost for replacing staff at their own organisation to be only around a few hundred pounds. Some go even further than that. Recently a HR Director told me with confidence that their recruitment cost was zero, given that they have developed a streamlined method of targeting appropriate candidates through social media without any direct financial spend.

And that is the nub of the matter. The direct costs of recruitment often bear little or no resemblance to the real costs of replacing a member of staff.

For a start there is the “downtime” between an employee leaving and a replacement starting. Very few employers can say with confidence that the vacated job role is immediately filled, and this void obviously necessitates other colleagues covering two or more jobs for a period. This is clearly going to be detrimental to that worker’s productivity and effectiveness, and if care is not taken possibly their engagement and loyalty to the employer also.

And then there is the much more intangible area of how long it takes a new employee to reach optimal productivity in their new job role. ccording to a report by Oxford Economics in 2014 it takes:

  • 15 weeks for a worker joining from another firm in the same sector
  • 32 weeks for a worker joining from another sector
  • 40 weeks for graduate joiner
  • 52 weeks for a joiner who was previously long-term unemployed or economically inactive

Of course it should also be noted that during the above periods the extra strain on other colleagues will continue (albeit on a decreasing scale over time).

Lastly there is an additional – and very important – hidden cost to consider. The departing employee may well be crucial to some key professional and business relationships for their employer. The loss of that employee could therefore be much more damaging than the costs directly related to recruitment and the time to reach optimal productivity noted above.

It follows that few organisations have probably fully assessed the cost of losing – and replacing – key employees at any level. The bottom line is therefore that it is usually much more important and cost-effective to retain talent than to try and replace it.

Clearly Employee Benefits have a key role to play in retaining staff, so we would urge more employers to consider how they can improve their offering – or possibly just communicate what they have better – to help with this dynamic. For more information please speak to your usual Jelf Consultant in the first instance.