Are you prepared for the cost of replacing employees?

Are you prepared for the cost of replacing employees?

Naturally, organisations go through different cycles and stages – sometimes needing to hire a large volume of employees, other times needing to farewell employees due to restructuring or redundancy. It’s always important for employers to be in control, no matter the situation, and providing thorough offboarding and outplacement programs can help employers to stay in control.

Throughout every cycle, it’s natural that employers may be looking to replace employees from time to time. However, the cost of replacing employees shouldn’t be overlooked – costing organisations anywhere between 30-150% of an employee’s salary to replace them.

The costs of replacement aren’t always obvious.

The direct costs of replacing an employee

There are many costs that are easy to identify when you need to replace an employee. These include but aren’t limited to:

  • Time spent without an employee in the role – the costs increases if it is a more senior or critical role
  • Recruitment fees
  • Buying new equipment
  • Investing in training for new employees

However, these costs only tell a fraction of the story. The hidden costs are what will make or break your organisation. Weiss holding a coffee cup

The hidden costs of replacing an employee 

The loss of any employee will have an impact on your team and organisation as a whole but some of the impact might be harder to quantify. When you farewell an employee – no matter the circumstances – you may experience:

Loss of capacity – when you lose an employee in a role that isn’t critical, it’s possible that the team can continue on with minimal disruption to their capacity. However, the closer the role is to the core area of your organisation, the more specialised the role often is, the harder it is to work without them and the harder it is to replace them. The longer this gap in the team continues, the more capacity will be reduced.

Loss of productivity – replacing an employee means that not only is there a gap in the team while you look for someone new, there is also training that needs to be done once you find someone. While this training is essential, it does mean more time off the tools, leading to a loss of productivity across the team.

Dampened team morale – it can be difficult to say goodbye to a coworker, no matter the circumstances. Teams can become frustrated and disengaged when these changes happen – especially if they’re concerned they may be made redundant, or they’re suffering ‘survivor’s guilt’ as a result of remaining behind.

Overloading of other team members – with any team member out of play, the remaining members can struggle to pick up the workload. In the case of redundancy in particular, it can mean a significant amount of work is redistributed, putting other employees under pressure.

Loss of client portfolios – the pressure to deliver, without the capacity to do so, can mean that delivery of some work becomes impossible. Clients can be left frustrated and ready to leave. Many clients also prefer to work with certain employees, especially in professional services, choosing to work with a particular lawyer or a particular expert – if that employee is no longer with the organisation, it can be reason enough for a client to walk away.

While each of these costs do not have a specific dollar amount attached to them, they can easily impact the bottom line for your organisation and, the longer it takes you to find a replacement employee, the longer these hidden costs will drag on, costing you greater amounts of money in the long run. Weiss sitting at a desk

Talent retention is important – and stay interviews are key

There are lots of ways that employers can check in with employees – performance reviews, engagement surveys, exit interviews, management training and ad hoc chit chat but they all have their limitations.

Stay interviews, however, are designed to open up a conversation and gather accurate feedback from employees to understand what they love about working with your organisation, how you can retain them effectively and what they’re looking for in the future of their role.

To give this feedback effectively, providing better insights, employees need to feel comfortable, which is why an independent, third-party interviewer can be of enormous benefit in any stay interview. Many employees may also feel that a stay interview has more gravitas if your organisation has paid someone external to conduct it – it’s easier to distinguish from a typical meeting that a manager may put in their diary on a regular basis, giving it more weight and importance.

Spending time focusing on stay interviews means you can avoid needing to replace employees as much as possible – an approach that can be worth its weight in gold in such a tight job market. Greg Weiss Stay Interview
Do you need help with supporting your employees?

Want to support your employees through restructures and redundancy with effective onboarding, stay interviews, offboarding, and outplacement programs? Get in touch with me today to organise a 1-1 call to see how Career365 can support you and your team. Click here for more information.


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Greg Weiss

Greg Weiss is the founder and director of Career365 and Australia’s leading career coach. Greg has coached well over a thousand people from recent graduates to CEOs as they pivot, re-launch and accelerate their careers. He is the author of three practical books and the creator of three online courses: “Career Clarity. How to find career fulfillment”; “Career Networking. How to unlock the hidden job market”; and “Career Success. How to succeed in your new job”.

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