The true business cost of training new employees
Element AI Element AI
March 6 3 min

The true business cost of training new employees

The baby boomer generation, which makes up a quarter of today’s workforce, is now approaching retirement age—meaning a wave of mass retirement is imminent. With this comes more than a simple loss of employees. Not only does such wide-scale, retirement-induced turnover come with the financial cost of training and onboarding, it also comes with performance costs, as organizations lose experience and expertise.

The financial cost of losing employees and hiring new ones

Employee retention is a significant issue in most industries. This is because it’s widely understood that tenured employees—regardless of role—drive much greater value than those who come and go after just a short period of time.

In fact, studies show that employees who leave can cost their companies anywhere from thousands of dollars to twice an annual salary.

Cost of hiring a new employee

Hiring is a complex and often expensive task that requires specific skills and resources. Calculating the overall cost is difficult because the process has several stages that vary depending on the role.

For instance, many companies use an external hiring team. This is an expensive service, as agencies regularly take between 15-25% of the employee’s annual salary.

Cost of training a new employee

It can take between 8-26 weeks for new employees to get comfortable in their roles and reach full productivity. To facilitate this settling-in period, most businesses offer in-house training or funding towards external training. Either way, the cost of training is significant—as the average company loses anywhere between 1-2.5% of their total revenue on the time it takes to bring a new hire up to speed.

The business cost of losing experience and expertise

Employees are an appreciating asset. The longer they stay within your business, and the more familiar they become with systems and products, the more productive they become. As such, losing quality employees with experience and expertise causes both a loss in productivity and a higher chance of errors occurring in your business.

Your workforce becomes temporarily less efficient each time someone leaves. This means that attrition has a huge impact on a business, particularly when you consider the length of time it can take a new person to reach the productivity levels of an existing, experienced employee.

Inefficiencies caused by losing experience and expertise can also lead to frustration among remaining employees, who will likely have to pick up the slack or rectify delays and errors.

And that’s not the only cost of losing an employee. Knowledge can be permanently misplaced when an employee leaves an organization, taking their institutional knowledge with them. If their expertise has not been documented for those remaining in the company, rebuilding will be a slow and frustrating process for all involved.

Reduce the cost of training and guide new hires with AI technology

With your workforce training on AI-powered products, such as Element AI Knowledge Scout, they will be better equipped to make sound decisions in moments of uncertainty. Leveraging this AI technology can reduce the skills gap left behind by the eventual departure of workers through retirement, and it minimizes the financial cost of training and the risks associated with human error.

An aging and retiring workforce will have an impact on your business in terms of finance and performance. That’s the bad news. But the good news is that now you can overcome these challenges by leveraging AI technology to bridge the knowledge and experience gap left behind by large-scale baby boomer retirement.