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The Cost Of Replacing Staff

An article in The Telegraph earlier this year caught my eye. I’ve mentioned once or twice that staff turnover, and the resulting knowledge loss, can be costly. The article in The Telegraph provides some numbers which are really quite startling:

The average fee for replacing a departing staff member is £30,614, says Oxford Economics and income protection providers Unum. This figure comprises two typical amounts – £5,433 for logistics, such as agency fees and advertising, and wages during the time when a new employee is yet to reach optimum productivity level, believed to be an average of 28 weeks at a cost of £25,182.

And specifically for IT:

IT and other technology is most affected by high staff turnover. The overall sector figure is approximately £1.9bn per year. Workers take more than seven months to reach their peak, at a cost of £31,808.

With most probationary periods lasting three to six months, this means on average a developer will reach the end of probation before reaching optimum productivity. Consider also that the average salary for a software developer in the UK is £30,000. This means the average cost of replacing a developer is higher than the cost of paying that developer’s salary for a whole year. Over the course of a year, losing one staff member a month would incur a staggering £367,368, or £381,696 in the case of losing one developer a month. Depending on the size of the company, this can be an unassumable expenditure.

According to Forbes, employees changing jobs can expect a salary increase of between 10 and 20%. Retaining the 12 departing employees, then, would cost between £36,000 and £72,000. It’s still a lot of money, but it’s only a fraction of the cost of replacing them. With such a large divide, it also allows the company to address other issues to aid in staff retention – employee benefits, training, work environment, morale, and so forth.

Photo by cobalt123 via flickr.