British business is losing £42bn a year through its failure to retain key staff, according to reseach from accountancy firm PricewaterhouseCoopers (PwC)
PwC found nearly a quarter of UK employees are either actively looking or planning to look for a new job because of unhappiness about expected pay and conditions in the coming year. Around 10.4% of UK workers in any one year quit their posts in favour of new opportunities compared to 7% in the US and just 5 % in France and Germany.
PwC says that the UK economy would be £42 billion better off if firms could improve employee retention. With an average UK annual salary of £25,000. a rise of just 1% in the resignation rate heaps £8bn of costs on to businesses.The cost of replacing those workers equates to around a year of the lost employee’s salary when taking into account lost skills, productivity, and the combined costs of recruitment and training.
But many firms are putting less effort into staff retention than they were previously. In 2009, 54% of businesses claimed to have a special focus on retaining top talent, but this has fallen to just 36%.
"With many businesses eager to maintain or grow staff levels as the economy starts to recover, it is crucial they consider the full costs of losing staff through resignation," said Richard Phelps, HR services partner at PwC. "The need is particularly pressing given that many employees who sat tight during the downturn may now be looking for new opportunities elsewhere."
"Employers often resist pay rises because of the immediate cost impacts, and may resent being ‘held to ransom’ by workers threatening to leave," said Phelps. "But losing dissatisfied staff can prove a far more costly exercise. When multiplied across a number of employees, high turnover can have a dramatic impact on a business’s bottom line."
One Response
It goes both ways
The facts are clear and well known. But presenting them this way is partial. In an economy ripe with job creation and start-ups it would certainly seem clearer, but a lost employee isn’t lost for everybody: how much are the business hiring these dissatisfied employees actually benefiting from the hire? Is the trade off only financially negative for the initial employer, or is new blood also cost ineffective? Many have argued that on the contrary, new employees offer a better cost/efficiency as well as other benefits to the company they join. These may be the real issues.
In other words, the cost of "market lubrication" may just be a natural cost. Comparing the cost of letting go the former employee and rehiring the new one to a simple wage increase, especially with the coming into effect of the new Equality Act, may lead to a warped perception of the natural cursus of an employee and its true motivations, as well as the real impact of new employees on business performance.