Hidden costs of recruitment: staff are leaving early, underperforming

BUSINESSES employing up to 250 people are losing 14 percent of their staff each year, only to see 39 percent of their new employees leave within six months.

Research by talent acquisition firm Oleeo shows SMEs are wasting an average of £125,347 a year on failed recruitment. The See the Unseen report examines the challenges HR teams contend with.

Charles Hipps, Oleeo
Charles Hipps

“People often think of recruitment as a cost centre,” says Oleeo CEO Charles Hipps. “They typically focus on the things they can see, such as agency charges or the cost of running the internal team.

“Far less attention is paid to hidden factors, such as staff churn, time taken for new recruits to start performing, or an organisation’s effectiveness at attracting talent that stays and performs.”

These unseen costs have a fundamental impact on bottom line, performance and the workload facing an HR team, says Hipps.

The research was composed using the viewpoints of 100 HR heads, who felt that finding the right talent was a major concern for UK businesses. Two-fifths reported a constant battle with people leaving. Almost half (47 percent) of respondents expect to lose over a tenth of their workforce in any given year. Combined with 14 percent of HR heads expecting new hires to leave within just 30 days, and 39 percent estimating it will be within the first six months, the scale of the problem becomes clearer. Even the optimists – 31 percent – expect a “long-term” employee to remain in their role for just 18 months, which means time and money are being wasted on recruitment which is failing in the long term.

Interview queue - costs of recruitment illustration
Are you waiting in line for a job … or for the excuse to leave one?

The recruitment process brings with it a plethora of problems. There are now 91 touch points in the average recruitment process, making it complex – yet HR teams are increasingly being judged on their speed to hire.

On top of this, 72 percent feel that competition for top talent is greater, or at least the same, as it was three years ago, while 94 percent have a problem with reneging – where people pull out of the process after accepting an offer.

The report also suggests that recruiters are struggling to find the talent to fill certain roles, with managerial, STEM and IT positions being the most difficult to recruit for. This means that the hiring process can be long, drawn out and resource-sapping.

Adding another layer of complexity to the situation is the diversity conundrum, which is still an issue for one in five. Almost half (48 percent) are actively looking to improve the ethnic diversity of their employees, and more than a third are striving for gender balance.

When a candidate is found and employed, there is a considerable delay until they “deliver” – and according to the report, many never do. Some 71 percent of HR professionals say it takes a new starter three months or more to get up to speed, and 14 percent saying it takes between nine months to a year.

Career decisions illustration
Career decisions: so many options, and so many potential wrong turns

Almost half of respondents believe new employees live up to expectations less than 20 percent of the time.

All these factors put a significant cost burden on organisations. The data shows that the average cost per hire, based on a £25,000 per annum role, considering all of the associated costs – HR team’s time, recruitment costs, training and onboarding costs, and loss of productivity – is £9,183.

“Let’s take an SME that employs 250 people,” says Hipps. “It is losing 14 percent of its staff each year, plus 39 percent of its new employees leave within six months. When you combine these figures with the £9,183 cost, we can assume that it is wasting £125,347 on failed recruitment each year.

“According to our research, 54 percent of senior decision-makers spend five percent or more of their turnover on recruitment. This can either be viewed as substantial backing from UK businesses keen to find new ways of attracting top talent, or as precious revenue being needlessly spent.”

Technology is seen by some as the answer, helping them find top talent faster, keep candidates more engaged and identify those most likely to succeed and stay. Almost 40 percent feel AI will reduce the risk of missing out on “hidden gems”, others believe it will be key in removing bias and predicting the likelihood of someone accepting a role.

“If people don’t embrace technology things are never going to get better,” says Hipps. “Technology allows HR teams to have quality and quantity when it comes to searching for talent. With the right systems in place, they can (find) the right people that are going to be successful and stay.”

To read the See the Unseen report in full visit https://info.oleeo.com/recruitmentchallenges