We recently helped a client reduce their annual leave and long service leave liability from $790k down to $200k. Now this liability was sitting on their balance sheet (looks bad to potential investors) and if a chunk of their team left suddenly, it would need to be paid out immediately. Do you have a spare $790K lying around?
So you might ask how did this happen? Basically no one had accountability to watch the balances or proactively manage employees to take timely leave breaks. And it made me think, how many other small businesses are sitting on business-breaking liabilities in their employee cost base?
I often hear that HR is the “soft & fluffy” part of the business, which makes me laugh as there is nothing “soft & fluffy” about terminating employees nor is there anything but hard costs attached to resourcing – which is usually either the first or second highest cost to a business.
So how can you protect your business? What are the 5 employee costs you need to understand to stop you going broke?
- Productivity Costs – knowing what your employees’ average productivity is and, even more important, how can you increase the productivity per employee? In other words, get more from less
- Cost of a Vacancy – do you know how much it costs to have an unfilled vacancy sitting empty for 6 weeks? The numbers are quite staggering so know these costs to protect your business
- Cost to Hire – did you know that it costs between 50%-150%, on top of the base salary, to hire and make productive a new employee? Make sure that you are only recruiting when you need to and recruiting the right people
- Attrition – employers intrinsically know that it is costly but employee churn is debilitating and costly for a business. Make sure your attrition rates sit between 10-20%
- Annual Leave, Personal Leave and Long Service Leave – do you know how many personal leave days an employee is allowed each year? 10 days – do you know how many your employees are actually taking? Do you know how much an extra 2-3 days is costing your business? It’s a lot, make sure that you are actively managing this figure.
We help our clients save literally thousands and thousands of dollars with our Employee Metrics scorecards. Make sure that you know what your employees are costing you and, most importantly, how you can ensure there’s no creep in this spend.
What do you think your employee costs add up to?