UK businesses have certainly not enjoyed an easy ride throughout the previous two years.
From the pressures of the Covid-19 pandemic to inflation reaching a 30-year high of 7 per cent and national insurance hikes, there has been an endless stream of financial pressure imposed on business leaders.
And unfortunately adding to such pressure is ‘the great resignation’. This began as a US phenomenon, although it is now being observed across UK businesses. Indeed, vacancies in the UK are at the highest level in 50 years, with almost a quarter (24 per cent) of workers planning to change jobs within three to six months.
Staff resignations are an unavoidable element of working life, however the current rate of resignations could be a cause for concern amongst business leaders.
The process of sourcing, recruiting and onboarding a new recruit can be a costly and resource-intensive process. So, several resignations within a short period of time cause a great deal of pressure on business owners.
As such, it is vital that business owners understand the true cost of staff resignations and, perhaps more importantly, reduce the chances of several resignations taking place without imposing any additional financial burdens on the business.
Understanding the cost of resignations
When considering the cost of replacing an employee following their resignation, it is important to acknowledge that it will vary from organization to organization – it will depend on the salary and seniority of the individual. However, some studies have developed a template formula to help organizations.
A recent study from the Society of Human Resource Management asserts that the cost of replacing an employee can cost a business an average of six to nine months of their salary. For example, replacing a middle manager earning £40,000 a year would cost an organization £20,000.
That said, some experts argue that the above calculations underestimate the costs of hiring an employee, potentially overlooking costs associated with recruitment such as the value of the time required from the business owner or senior members of staff when it comes to training and onboarding the new recruit.
Particularly in the current economic environment, one would assume that replacing staff could come at an even greater cost. Indeed, widespread reports and insights from recruiters have indicated that, despite the UK having multiple vacancies, businesses are experiencing a shortage of potential candidates. This suggests that the cost of replacing staff could be even greater than some organizations first assumed.
Of course, business owners cannot force employees to remain in their current role. In most cases it is likely that the employee in question will simply be ready for a change and to pursue the next point of their career.