By Mansour Bakr, PHRi, SHRM-CP
11 December 2017
11 December 2017
Employee voluntary turnover means significant costs for employers in Saudi Arabia. Some of the turnover costs to replace an employee includes a drop in productivity during training, the costs of hiring a new employee, and the slower productivity until the new employee gets up to speed in their new job and drop of work while a position is vacant.
Staff retention is not as simply as you think. Simply put “Find ‘em and Keep em”. Maintaining a stable workforce by reducing employee turnover through flexible workplace policies and employee retention programs also makes good business sense, as it can result in significant cost savings to employers.
Employee Turnover Cost
Employee voluntary turnover for lower-paying jobs (under SR. 54,000 a year - clerical jobs) are slightly less expensive to replace, around 12 percent of annual salary, but that still adds up quickly. For example, 20 staff of a hyper-supermarket employees voluntarily quit a job in 2017. That represents a major expense of SR. 129,600 to a business.
So, in the above example, choosing to not give an average performer a raise may net a temporary cost savings, but if she/he voluntary quits you'll be out 12 percent of her/his salary. Losing an executive/senior management can reach up to 35%+ of the employee’s annual salary.
While there is no perfect package solution that will stop employees from voluntary leaving a job, companies should take turnover costs into account.
Our survey of 30 companies in the Riyadh area from various sectors ranging from retail, contracting, trading and manufacturing demonstrated that it costs businesses on average 19% of an annual salary to replace an employee. For businesses that experience high levels of voluntary turnover, this can add up to represent significant costs.
Jobs that are complex and require high level of education and specialized training incline to have higher turnover costs. As per the below Figure 1, we reported the “typical” cost of voluntary turnover using the median among all jobs.
Figure 1: Employee Turnover Cost Pay Levels
Direct Cost Factors
The first type of cost is direct costs. This category includes:
Indirect Cost Factors
The second category of turnover costs is indirect costs. This category includes but not limited to: