In today’s competitive business landscape, hiring the right person for a role is crucial for the success and growth of any organisation. However, employee turnover can significantly impact a company’s bottom line.
Hiring, training, and onboarding new employees only to have them leave without contributing to the company’s growth can be costly, time-consuming and detrimental to productivity, morale, and customer satisfaction.
Many businesses turn to employment screening to mitigate these costs and ensure the right fit for their organisation. Employment screening involves conducting comprehensive background checks and assessments to evaluate a candidate’s qualifications, skills, and cultural fit.
This article will explore the true cost of employee turnover, the benefits of comprehensive employment screening in Australia, and the cost-effectiveness of implementing these screening practices.
The True Cost of Employee Turnover
In today’s competitive business landscape, hiring the right person for a role is crucial for the success and growth of any organisation. However, employee turnover can significantly impact a company’s bottom line.
Hiring, training, and onboarding new employees only to have them leave without contributing to the company’s growth can be costly, time-consuming and detrimental to productivity, morale, and customer satisfaction.
Many businesses turn to employment screening to mitigate these costs and ensure the right fit for their organisation. Employment screening involves conducting comprehensive background checks and assessments to evaluate a candidate’s qualifications, skills, and cultural fit.
This article will explore the true cost of employee turnover, the benefits of comprehensive employment screening in Australia, and the cost-effectiveness of implementing these screening practices.
Benefits of Comprehensive Employment Screening in Australia
Implementing comprehensive employment screening practices can bring numerous benefits to businesses operating in the Australian market. These benefits include the following:
- Ensuring a cultural and skill fit
- Reducing turnover
- Protecting company reputation
- Cost-effectiveness
Ensuring a Cultural and Skills Fit
One of the primary goals of employment screening is to align candidates with Australian business values and needs. Background checks and assessments can assist businesses in determining whether a candidate has the skills, qualifications, and experience required for the job.
Additionally, screening can help assess a candidate’s cultural fit within the organisation, ensuring they will thrive in the company’s work environment, values, and team dynamics.
Reducing Turnover
Comprehensive employment screening can significantly contribute to reducing turnover rates.
Businesses can identify individuals more likely to stay in the Australian marketplace by carefully evaluating candidates’ backgrounds, qualifications, and previous employment histories. This screening process enables organisations to select candidates who align with the company’s long-term goals and vision, reducing the risk of turnover and the associated costs.
Protecting Company Reputation
In today’s digital age, a company’s reputation is paramount. Employment screening is pivotal in safeguarding a company’s reputation by avoiding potential legal and PR issues specific to the Australian market.
Conducting background checks can help identify any red flags, such as criminal records or employment history discrepancies, that could harm the company’s image or pose a risk to its customers or other employees.
Cost-Effectiveness
While some businesses may view employment screening as an additional expense, it’s necessary to consider the cost-effectiveness of this practice. Compared to the expenses associated with replacing an employee, comprehensive screening can be a cost-effective investment.
By selecting candidates more likely to stay long-term, businesses can save money on recruitment, training, and onboarding. Plus, by avoiding potential legal or PR issues, companies can save significant money that would otherwise be spent on mitigating the consequences of a bad hire.
Comparing the Costs in the Australian Context
According to Human Resources Director Magazine, the average cost of hiring has surged from $10,000 to $23,000 per candidate in the past year. Some companies even report expenditures as high as $40,000 per hire. However, these figures likely encompass only the direct costs associated with recruiting.
The Australian HR Institute paints a more comprehensive picture, suggesting that the true cost of replacing an employee is closer to up to 1.5 times their annual salary.
So, to further understand the financial benefits of comprehensive employment screening, let’s compare the average cost of employment screening with the average cost of replacing an employee in the Australian market.
While the specific costs may vary depending on the industry and position, the following breakdown provides a general overview.
Let’s say a company with 50 employees experienced a 20% annual turnover, resulting in 10 resignations per year. If the average weekly earnings are $1,586.20 and adding 30% for benefits and other costs, the total comes to $2,062.06.
Given that most sources suggest the true cost of replacing an employee is anywhere between 100% – 150% of their annual salary, let’s assume, for the sake of this example, that the turnover cost equals a year’s total remuneration for each employee.
In that case, the annual cost of turnover would be $2,062.06 x 52 weeks x 10 employees, totalling $1,072,271.20.
Now, let’s juxtapose this with the cost of implementing a comprehensive employment screening framework in Australia.
According to various HR consultancies and employment screening service providers, the average cost of a thorough background check in Australia ranges from $100 to $500 per candidate, depending on the depth of the check.
This cost includes criminal history checks, qualification verifications, reference checks, and other relevant screenings.
For the sake of argument, let’s consider the higher end of the spectrum, $500. If a company with 50 employees decides to screen all its new hires, the total cost for 10 employees (considering the 20% turnover) would be $5,000 annually.
This is a mere fraction of the potential turnover costs.
The difference is stark. Investing just $5,000 in a robust employment screening process can save a business over a million dollars in turnover costs.
Beyond the monetary savings, a rigorous screening process can also ensure that the company hires candidates who are a good fit for the organisation, further reducing the likelihood of early resignations and the associated turnover costs.
Key Takeaways
Investing in comprehensive employment screening is a strategic approach to mitigating employee turnover costs. Businesses can make informed decisions that benefit their long-term success by ensuring cultural and skill compatibility, reducing turnover rates, and protecting the company’s reputation.
Businesses must view employment screening as a long-term investment rather than a short-term expense.
As the Australian market becomes more competitive, businesses must adapt and improve their hiring practices to attract and retain top talent. Employment screening is a valuable tool that helps businesses make informed decisions, minimise risks, and optimise their human resources.
Contact us today if you would like to learn more about how Accurate Australia can help you develop a comprehensive employment screening framework.
