Australia is currently in what many consider to be a talent shortage. With the unemployment rate sitting at 3.9% there are more Australians in paid work than ever before, with many employers simply struggling to fill vacancies with appropriate and well-suited candidates.
Another issue that businesses are facing is that after 2 years of Covid-19 related closures and shutdowns, there is simply just not as many funds available in the business’ offers for recruitment and training of new employees as may have previously been the case. With many businesses now realising the true cost of hiring a new employee. We take a look at what costs businesses face when hiring a new employee and what corners, if any, you can cut as a business owner to ensure your job vacancies are filled with skilled employees. The facts and figures!
In a growing number of industries, the true cost of hiring an employee can often exceed the employees annual salary. On average in Australia the cost to recruit and hire a new employee hover around the $23,000 mark according to the HR Industry Benchmark Survey 2021 Australia and New Zealand. The $23,000 cost includes training which accounts for 1.5% of the figure as well as other costs such as equipment, office space and onboarding and induction processes.
Another cost which is not built into this figure is any retention payments. So, by the time salary and superannuation are added, the figure becomes quite substantial. In terms of real time, it takes employers approximately 40 days on average to fill a vacant position. One of the factors that is not considered in terms of costs to business, is the loss of productivity cost should the vacancy be completely vacant for the duration of this time. Naturally this will again be a further cost that the business must absorb. In terms of people looking for work, the general nature of the average Australian employee in 2022 is that, generally they are willing to seek out the best opportunities for them and they are willing to swap and change to find that ‘perfect role’. The overall average employee turnover rate reflects this, with the rate currently sitting at 17% and increase of 2% from 2020. What do employers need to consider?
Whilst the above facts and figures provide some vital context when it comes to the average costs associated with a new hire, these cost rates will not apply to all businesses. As all businesses and all industries are different, the costs associated with a hire for your business may be greater or substantially lower. With such staggering costs associated with hiring a new employee employers need to look at ways to streamline their recruitment process, not only so they potentially save money, but so they get the most bang for their buck! The costs that employers need to consider include;
· Wages and bonuses
· Equipment and office space
· Training and education
· Legal responsibilities such as PAYG, Superannuation and fringe benefits obligations
· Recruitment costs such as preparation of job descriptions, third party advertisement costs, interviewing and conducting background and reference checks.
Do you really need new blood?
Another factor that business owners should consider is whether or not they really need to hire a new employee. Is it possible to work with what you have or to promote from within, with both of these processes ultimately saving businesses considerably?
The effect of the pandemic
Prior to the Covid-19 pandemic in 2020 the average cost of hiring an employee was around $10,500. One of the reasons attributed to the increased average cost was that in the last 2 years a greater number of mid-level managers have been hired. Another factor that can be directly attributed to this cost is that employers are now consistently looking for new opportunities and are more likely to jump into a new role as opposed to staying loyal to their current employer. A survey conducted by PWC of 1800 workers concluded that 38% of Australian workers are actively seeking to leave their current roles within the next 12 months. This is mainly due to career changes, and people wanting a change of scenery after being effectively housebound for the past 2 years. How can DreamStone HR help?
With the costs associated with hiring a new employee high, it is important that when you do go through the hire process, the end result is the perfect employee for the role and for your business. This is where the Dreamstone team can assist. With substantial experience across all levels of HR we can provide valuable advice and support throughout the recruitment process, assisting you to create a streamlined and seamless process.
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