There will come a time in all small business owner’s life when they discover the true cost of replacing a member of staff. Small businesses often run on tight budgets, meaning it is even more important to understand the average cost of replacing someone, and taking steps to prevent it before the eventuality happens.
Money-saving is vital to SME growth, and employee retention should be seen as an area for businesses to improve upon to reduce costs year on year.
The average cost of replacing an employee
According to a recent report by The Undercover Recruiter, the average cost of replacing an employee for any business in the UK is around £3,000, once all recruiting or advertising fees have been considered.
The cost of replacing a good employee, however, can equate to much more than £3,000 within a small business, as talented staff can often prove difficult or impossible to replace. From the moment a staff member serves their notice, the cost to replace them begins, from recruiting through to salary expectations for a new staff member and training.=
Most small business owners simply do not have the time to proactively search on sites like Linkedin and Indeed, so choose to hire through a recruitment agency. This is the most costly approach, budget-wise, as the average recruiter will take around 20% of the salary of the replacement staff member, which can be around £5,000.
Once the ideal candidate has been found, there is also the overlooked cost of interviewing and the additional salary paid in the overlapping time that two people are being paid for one role whilst training and handovers take place.
Pensions have also become a new cost for employers to consider, as the introduction of the government’s auto-enrolment scheme has meant employees are automatically signed up to a basic pension scheme. Employers are now required by law to contribute 2% of a worker’s monthly salary towards a pension. This is also set to increase in April 2019 to 3%, which is an important change for all small business owners to bear in mind when considering staff budgets for 2019 and 2020.
Improving staff retention
Although there are always going to be occasions when staff inevitably move on, there are a few things business owners can do to prevent losing staff regularly and improve retention within their company.
Often staff members have ulterior motives when accepting alternative roles such as: higher pay, career progression, and a better work-life balance, especially if it means reducing their commuting time to and from the office.
There are some factors that are simply out of the control of any employer, such as location or commuting time but there are some things that employers can ensure are in place to improve staff retention and create a happier work environment, reducing the risk of additional or unexpected costs as a result of losing staff.
Having regular performance reviews will not only strengthen communication with your employees and help build on their skillset, it will also help them proactively work towards a goal, inevitably progressing your company too. Set clear and achievable goals at regular review times to help your employees progress and reward them when they achieve their targets.
Recognising your employees have a life outside the office is an important element of being a successful boss. Being approachable for staff to request time for appointments or for last-minute childcare arrangements is an invaluable quality as it relieves any pressure employees may be feeling outside the office. Your staff should feel valued and respected, they shouldn’t feel judgement if they’re not working through their lunch break or staying late a few times a week. Set clear office times and encourage staff to take regular breaks and leave on-time.
Having a flexible approach to working hours is another great way of allowing your staff to work around school pick-ups or long commutes. A flexible working day creates a laid back and relaxed environment which helps companies retain employees as it removes a key stressor which, otherwise, may have had them looking elsewhere.
This is an essential part of running a successful business, as every employee wants to ultimately feel secure within their position at work. As a small business owner, it is your responsibility to create a working environment that emphasises the value of each employee within the company. With the increase in pension contribution for business owners due in 2019, ensuring your employees that the business is investing in their future will also help them feel valued and secure in their role.
The physical work space
The physical space in which your business functions also has a real impact on the happiness and productivity of your employees. Working in a cramped, overcrowded space can make staff feel overwhelmed, stressed and ultimately unhappy. Poor lighting, unreliable or slow-working systems and even uncomfortable seating can all amount to staff feeling down and miserable at work. The space in which we work has a large impact on emotional and physical wellbeing, so it is important to regularly review any equipment and furniture your staff use, day-to-day.
Creating a great workplace culture
Creating a positive working culture within your company does take time but the positives largely outweigh the effort it takes to create a happy culture. An unhappy workforce can have a detrimental effect on the overall success of your business. As well as considering the elements covered, you also need to ensure your company has a mission statement or an overall goal that all employees can work towards.
Having a target or purpose for coming to work five days a week, not only helps in making employees feel a part of a large team, they will feel valued as their workload is contributing towards a bigger goal.
Taking some time out of running your business to focus on team-building and socialising with your staff will help to create a better workplace culture and ultimately happier employees. If you are concerned you may need to work on the culture within your business, our article on creating a great workplace culture within your business will help outline and identify any elements you may have overlooked.
Neglecting your workplace culture and staff happiness will have a negative impact on the running of your business, costing you staff and, ultimately, money. By taking some time to focus on staff well-being, it will not only ensure all employees feel valued and respected, but it will largely reduce the risk of the costs that come with employees leaving as well as ensure your business is run within a positive working environment.