Please Pass it On
This week, a fascinating piece of research released by Oxford Economics (for the income protection specialist Unum) calculated that the annual cost of replacing employees in the UK exceeds £4 billion and suggested that the average cost of replacing a member of staff is now more than £30,000.
The total incorporates both the logistical costs of recruiting and the cost of wages before the new employee gets up to full productivity. The logistical cost breakdown may seem all-too-familiar to budget-conscious HR and Recruitment professionals: hiring temporary worker(s) prior to replacement â £3,618; management time on interviewing â £767; recruitment agency fees â £454; advertising â £398; HR processing time â £196.
Highest average replacement cost was found to be in the legal sector (£39,887), followed by the accountancy profession (£39,230). Retail was seen as the ‘least expensive’ sector for replacing staff, at an average cost of £20,114 a head. But the real cost to all businesses is probably even greater â¦
Beyond the CPH and TPH, the report also estimated that it takes some 28 weeks on average before a new employee is fully up to speed, costing a median £25,812 in wages. The team here at 52N has long thought that this TTP – ‘Time to Perform’ – is probably the most significant KPI of all. Because it begins to measure how ‘right’ the hire is; and starts to give an indication of the new employee’s real value to the business. It also, of course, gives a deeper insight into the value being delivered by the Recruiter themselves.
And perhaps Recruiters perform better in this regard when they are under the spotlight to deliver ‘real value’. We say this because the report highlights that the smaller the business, the quicker new workers reach optimum productivity. In SMEs, they achieve this within 24 weeks; in the smallest businesses, just 12 weeks. Is this because small businesses have a more empowered culture; or because their Recruiters understand that every hire is mission-critical when building a critical mass?
We believe TTP is going to become an increasingly important KPI when assessing recruitment efficiency and is a much more accurate indicator of both the ‘real cost’ of recruitment and the ‘real value’ of a good Recruiter.
Please Pass it On