Why Does Employee Retention Matter?

Most companies these days realise the long term benefits of attracting and retaining high calibre employees although having done the hard work of recruiting industry top talent many suffer significant financial consequences from having high employee turnover rates.

According to a recent report by the Chartered Institute of Personnel and Development, the costs of labour turnover per employee range from £20,000 for senior managers and directors to £2,750 for manual and craft workers which equates to an average of £5,800.

To put this into context, a call centre with 300 employees and a turnover rate of 25% would incur costs of £435,000 which are directly related to employee attrition. Reducing the turnover rate to 20% would result in a cost saving of £87,000 due to lower training and recruitment costs e.g. less advertising for vacancies, fewer interviews and assessment centres.

The company also benefits from the retained knowledge and experience of its employees which may otherwise be lost by companies with high levels of employee turnover. Employee morale and motivation can also be significantly damaged by high attrition rates as strong colleague relationships often take time to develop and grow.

Having a competitive benefits package and ensuring that your people feel valued are vital ingredients in the ongoing war for talent. Just as it makes good business sense to hold onto your existing customers due to the high cost of obtaining new ones, the same is just as true for your employees. Companies are relying on excellent customer service to differentiate themselves in competitive markets and organisations with employee retention problems will find it increasingly difficult to meet customer's rising expectations.

As 2009 draws to an end and the economy continues to improve companies will have to work even harder at retaining their most important assets as more and more job opportunities arise to tempt dissatisfied employees away.

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