Firms still ignorant of the costs of staff turnover

Dec 09 2003 by Brian Amble Print This Article

Staff turnover in the UK hit its lowest level for four years during 2002, falling two per cent on 2001 to 16.1 percent - still a relatively high figure historically.

But despite the fact that these lower turnover levels have a negative effect on organisational performance and represent a significant cost, the majority of organisations are unable to say what this cost really represents.

The latest Chartered Institute of Personnel and Development (CIPD) Labour Turnover survey shows that turnover has fallen more than 10 percent since 2000, reflecting the sluggish economic climate of the past few years.

But the survey of 577 personnel professionals across all industrial sectors in the UK and 69 from Ireland shows that the majority of organisations are not attempting to calculate the real cost of staff turnover.

Even though more than six out of ten organisations say that say that turnover has a negative effect on performance, a mere 12 percent are able to provide even approximations of the costs (9 percent in Ireland) - and even these estimates are much lower that those calculated by expert consultants in the field.

CIPD Adviser on Reward and Employment Conditions, Charles Cotton, says: "Labour turnover appears to be on a downward trend - which is good news for employers. But most are completely unaware of the savings that they might achieve my reducing it further - even by just a few percentage points.

"There seems to be no systematic approach to stemming the losses - with most reporting the use of exit interviews as a tool to diagnose the reasons behind labour turnover. But the reality is that people do not always tell the truth for fear of burning bridges - and organisations need to be doing much more to find out why people leave them."

According to the CIPD, the true costs associated with the departure of an employee include all direct and indirect costs incurred as a result of the resignation and the replacing the individual. This encompasses recruitment costs, management time, the cost of induction and any training and taking into account that it will take the new incumbent some time to become fully effective in their job.

Adds Cotton: "While there is no universally acceptable level of turnover, and the figures will differ from industry to industry, most employers will recognise if they have a problem. They ignore this at their peril - staff retention is a key priority for personnel professionals and for their employers."

The primary reasons cited in the survey for labour turnover relate to the lack of career and developmental opportunities and pay.

The survey also found that the occupational group with the lowest rate of staff turnover is personal and protective services, where 63 percent of organisations with employees within this category report no labour turnover at all during 2002. The occupational group with the highest rates of reported turnover is administrative and secretarial jobs, where 3 out of 10 organisations report 20 percent or more annual rates of employee turnover.

However the hotel, catering and leisure sector and call centres have the highest rates of staff turnover, at around 40 percent in 2002. Low rates of turnover (i.e. around 10 percent) are generally found in manufacturing, transport and storage, and paper and printing.

The average cost of labour turnover in 2002 for the UK is 4,301 per leaver. The costs of turnover are highest for managers (6,807), followed by professionals (5,864). For Ireland, the average cost of staff turnover is 4,927.