Understanding the True Cost of Recruitment

A report by Oxford Economics made headlines when it revealed that replacing a member of staff can cost a firm over £30,000. Whilst this recruitment figure may seem shocking and hyper inflated, when we look into the reasons behind it we can see that the figure is more realistic than first glance would suggest. There are two main components of the cost;

  • The cost of recruiting and settling a new employee
  • The lost output whilst the replacement employee gets up to speed

Findings from the report suggest that on average, workers take up to 28 weeks to reach their optimum level of productivity. Therefore, we can see how lost output becomes a major cost. This time has an associated cost of approximately £25,000, setting it as the most expensive component.

The costs associated with the recruitment process are estimated to stand at around £5,400. This figure has been further broken down as;

  • Hiring temporary workers as a replacement: approx. £3,600.
  • Management time for interviewing candidates: approx. £760
  • Recruitment agency fees: approx. £450
  • Advertising fees: approx. £400
  • HR time processing replacement: approx. £200

These are the costs of recruitment for replacing just one member of staff alone. However, the costs do not include the business impact that retention has on the morale of the existing workforce. The loss of team members can have an impact on the product or service quality which is passed on to customers, especially during the time when a new team member is getting up to speed.

Across the five sectors analysed, the overall financial impact amounts to £4.13 billion a year.

There are other factors which can influence the cost of staff replacement. Below is an overview of findings:


Time taken till Optimum Productivity (weeks) Cost of replacement employee (£) Overall annual cost to sector (£)




805 mil




580 mil

IT & Tech



1891 mil

Media & Advertising



184 mil

184Retail 23 20,114

673 mil

New employees joining from the same sector can reach optimum productivity much faster than those coming from other sectors. Time reduced to 15 weeks rather than 32.

The findings highlight the importance of high staff retention. Businesses should work on developing their team members and retaining talent to reduce turnover costs. Keep in mind that financial rewards are not always the answer. Employees should look into other benefits to offer employees such as better training or more flexible working hours.

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