The True Cost of Staff Turnover and How Offshoring Can Help

November 29 ,2022
True Cost of Staff Turnover and How Offshoring Can Help, AS White Global

In recent years, staff turnovers and talent shortages are two glaring workforce issues that have been putting a huge strain on Australian businesses. According to a PriceWaterhouseCoopers report, around $385 AUD million is lost on recruitment costs that could’ve been avoided. Based on the findings in the 2022 Skills Priority List Key Finding Report by the National Skills Commission (NSC), there are 286 occupations with talent shortage problems at a national level. That’s nearly double from last year’s figure (153 occupations).

The common reasons why staff leave their employers include under-market salary packages, the lack of career development, low job satisfaction, poor work-life balance, misaligned values between the employee and the company, and an overall sense that certain needs are not being met, among others. According to the NSC report, some employers are dealing with job vacancies by either re-organising the corporate structure, revising the job requirements or simply giving up on filling the position. Other companies have increased salaries or bonuses for their current employees to encourage staff retention.

Cost of Staff Turnover in Australia, AS White Global

Repercussions of staff turnover to your business

The increasing frequency of staff turnovers in a company can have a serious impact to these areas of the business:

1. Loss in sales

Customer service is impacted by employee turnover when someone who has a deep grasp of their client departs, and a new employee will undertake a lengthy onboarding when they take over. During the adjustment period, customers may receive substandard response times which can lead to loss of confidence in the business.

Lost sales in relation to staff turnover are determined based on the following factors:

  • The weeks during which the sales job remains vacant multiplied by the average weekly sales made by the previous employee, plus
  • The decrease in sales made by the new staff versus the previous staff multiplied by the number of weeks to meet the level of sales of the previous employee.
  • Depending on the level of product knowledge, expertise, and network needed to succeed in that particular industry, the lost sales may be considerable.

2. Diminished productivity

The new hire’s productivity often starts out fairly low after their initial training, but this will steadily climb over a few months. During this period, the immediate manager or colleague will frequently supervise the new hire. This will affect their own productivity as well. Mistakes that the new employee might make as they get up to speed should also be taken into account. Take into consideration the complexity of the job as well which will require more time for the new staff to adjust to.

3. Lost time and expenses in HR management

Based on the 2022 AHRI report results, it takes Australian organisations an average of 38 days to fill vacant roles and 59 days for executive roles. HR spends around 7 hours per week in ‘conducting role-specific training’ for the new hire. One out of three respondents said that ‘recruiting and executive search’ takes up a lot of their time.

Every step of the staff turnover process costs time and money:

  • Separation – this includes exit interviews, administrative costs, superannuation, taxation, severance and other benefits, temporary fill-ins, and management planning.
  • Recruitment – this entails advertisement costs, recruiter’s time and effort to understand the job requirements, assessing applications, preparing and conducting interviews, checking on the applicant’s references, making the offer, and notifying the successful hire and unsuccessful candidates.
  • Onboarding – this involves orientation costs, job and departmental training, and the time it takes to oversee and build a relationship with the new hire.

Staffing solutions via offshoring opportunities

According to the 2022 NCS report, more than half of the 20 largest employing occupations are facing severe skills shortages. As of August 2022, the number of job advertisements reached as high as 309,900 That’s a 42% increase versus the previous year.

Turnover rates have also increased. Based on the 2022 AHRI report, the employee turnover rate in Australia rose to 17% in 2021 — a 2% increase from 2020. For 24% of respondents in the HR field, recruitment is their biggest challenge for the next 12 months.

Offshore staffing solutions have become a strategic option to address these issues. More than 30,000 Australian companies are currently offshoring part of their business functions to other countries. Interestingly, many assume high staff turnover is a common issue when looking at offshore staffing. The reality, if done correctly, is quite the contrary as offshoring can help your company to retain great talent.

Offshoring can fill the talent gap and resolve turnover issues in these industries with high turnover rates.

2021 Turnover rates per industry, AS White Global

An offshore services provider can offer the following benefits for Australian businesses:

1. Wider sources of talent

An experienced offshore services provider can give companies access to an extensive network of highly skilled talent from other countries. Think of them as integral members of your company based in a different location. Given their qualifications and work experience, an offshore global team is fully capable of handling a variety of roles that range from back-office functions to high-level, technical work.

The provider will do a deep-dive of the company’s talent requirements and recruit the most qualified candidates. Unlike outsourcing, employers and hiring managers will still have complete control over the recruitment process and candidate selection. That way, they’ll get the most qualified candidates who will be the right fit for their business.

2. Improve efficiencies in business processes

Among the pain points that in-house staff are experiencing is the lack of time and energy to focus on their core duties to the business. They are burdened with tasks that are time-consuming and tedious yet essential, such as administrative work and other back-office functions. This hinders them from their main responsibilities to grow the business, impairs their level of productivity, and can cause burnouts which can trigger them to leave the company.

An offshore global team can take on this burden and provide support to the in-house staff. Streamlining operations with the help of a remote team can greatly improve efficiencies in business processes whilst maximising the skills of the internal staff for more high-performing, strategy-oriented tasks.

3. Handles HR management

According to the AHRI 2022 report, the top five tasks that take up too much time for internal HR teams are general administrative work, recruiting and executive search, operations management, workforce management, and onboarding/induction.

An offshore services provider can take on these tasks to meet the HR needs and requirements of the remote team. Whilst the company (the offshore provider’s client) focuses on the work that the offshore staff is expected to deliver, the offshore account manager will serve as the eyes and ears of the client in managing the remote team, including payroll, performance reviews, development training, and other HR-related compliance requirements.

The expert offshore service provider in Australia

For more than 10 years, AS White Global has been providing essential business processing support for companies in Australia, New Zealand, US, and the UK. Our account management and talent acquisition teams have extensive experience in recruiting and managing offshore global teams from our offices in Vietnam, Malaysia, and the Philippines.

You’ll have the advantage of accessing highly skilled talent who have the necessary qualifications and work experience to perform a variety of functions in different industries: IT and software development, accounting and finance, healthcare and insurance, marketing and creative services, and customer service, among others.

If you would like to know more on how your business can benefit from our offshore staffing solutions, book a free consultation with us today.