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Revealed: The two costs that come with employee resignations

by , 08 April 2014
Did you know that there are different costs associated with employee resignations? Read on to find out what they are so you can manage resignations. This efficient and professional manner will help ensure your business isn't affected by employee resignations.

The costs of resignations explained

The different costs associated with employee resignations can be divided into two categories:

  1. Intangible; and
  2. Extraordinary costs.

Let's take a look at each of these.

Beware of intangible costs when it comes to resignations

The Practical Guide to Human Resources Management explains that intangible costs refer to the financial repercussions of the employee's resignation.

These costs include:

  • Costs of a negative effect on staff morale, especially if the outgoing employee was popular with his colleagues.
  • Costs from lost productivity. The employee may not be very productive during the notice period.
  • Low productivity levels of the new employee. You'll need to accept that a new employee takes up to six months to become fully operational.
  • Departing customers. Sometimes customers will follow an employee to his new organisation.

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When it comes to resignations, you'll also incur extraordinary costs

Extraordinary costs are costs you'd not normally think about. They sometimes only become apparent later on.

These can include:

  • Consequences affecting your BEE rating. This is if you lose your talented black employees;
  • The loss of intellectual property;
  • Losing a key employee during times of significant change such as a merger; and
  • A fall in share price, for example, when a top executive resigns.

Well there you have it. While you can't stop employees from resigning, knowing about the costs that come with resignations is important. It will help you to put measures in place that can minimise the effect on your business when your employee departs.

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