Employers losing out on significant funds due to inefficient recruitment and retention practices – study

Organisations in the UK are squandering substantial funds on inefficient recruitment and retention strategies, often investing heavily in addressing skills shortages without assessing their return on investment (ROI).

This is according to new data from resourcing transformation expert Omni RMS and the Chartered Institute of Personnel and Development (CIPD), as highlighted in their 2024 Resourcing and Talent Planning Report. 

The findings reveal that fewer than a quarter (24 per cent) of organisations currently measure the ROI of their hiring activities. Furthermore, less than a third (31 per cent) of those aware of turnover data within their organisation calculate the associated costs of labour turnover. 

Omni RMS warns that this oversight could be costing employers hundreds of thousands of pounds annually. According to its Recruitment Cost Calculator, which assesses the true cost of hiring and retention for businesses in the UK, a company hiring 100 people a year could face losses exceeding €607,663 due to inefficiencies. This estimate is based on average turnover rates of 34 per cent and an average annual salary of €43,144 for permanent employees. 

The Resourcing and Talent Planning Report also reveals that 32 per cent of private-sector organisations plan to increase their recruitment budgets this or next year to tackle the ongoing skills shortages, potentially exacerbating the issue. 

Louise Shaw, Managing Director at Omni RMS, commented on the findings. “It’s astounding that so few companies are tracking the return on investment in their recruitment activity. People represent the largest expense for most organisations, and failing to identify inefficiencies can have a significant impact on budgets. The cost of a wrong hire goes far beyond recruitment expenses - it disrupts business performance and team morale, potentially increasing attrition rates even further," she said.

Ms Shaw emphasised the importance of tracking the effectiveness of hiring practices to address high turnover rates. She noted that organisations need to identify inefficiencies in their recruitment processes, whether in attraction, selection, or onboarding.

"Unfortunately, many lack the necessary skills and technology to go beyond traditional metrics, such as time to hire, which are irrelevant if there’s a revolving door," she concluded.