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Employee turnover remains regional business’s invisible enemy, despite global crisis, says management expert

United Arab Emirates: Saturday, December 13 - 2008 @ 16:29

Zed Ayesh, Managing Director, Flagship Consultancy, says:

“Employee turnover has always been one of the invisible enemies of business in any growing economy; it is invisible because most costs associated with staff turnover cannot be directly itemized in the profit and loss statement or reported at the end of the fiscal year.”

Ayesh adds: “Mobility of skilled professionals remains a challenge to UAE businesses. This is costing businesses a substantial deal of wasted resources and weakening their competitive positions against those which are having a stable workforce with lesser turnover rates. Regional companies are losing significant revenue opportunities because the majority of the departing professionals own unique expertise and knowledge and they are being head-hunted by direct competitors to their incumbent companies.”

Turnover has both monetary and non-monetary consequences and costs. Separation process like severance package and end of service benefits, cost of employment card and visas, absence of person to fill the vacant post, loss of productivity and lost knowledge and training of former employee. Also, costs includes recruitment process like fees of recruitment agencies or cost of advertising for the vacant post, screening and interviewing candidates and cost of administrative process.

Ayesh says: “Training is also a big issue for recruiting a replacement of departing employees which includes cost of new training time, materials, cost of new employee productivity (about 24 weeks to be fully productive), supervisor time in training and other staff time. Also, costs includes loss of revenue, slow customer service, less production, inability to take on more business, inability to deliver projects on time, dealing with penalties, lost business relationships and contacts.

Low moral costs include strained staff will be under pressure and perform worse, high turnover will make the organization perceived as weak or not a good employer and turnover will make current staff feel under-appreciated.

Ayesh adds: “Costs of turnover can easily surpass 150% of the employee compensation figure and would be much higher for managers and high paid executives.”

According to the most recent Labor Report released by the UAE Ministry of Labor, expatriate labor in UAE makes up more than 90% of the private sector’s labor force at about 3,113,000 foreign workers employed by 260,000 establishments, which is an average of 12 workers per establishment. Also, a recent Bayt.com and YouGov SIRAJ study said that the average monthly salary in the UAE is Dhs10,120 ($2,750) and the average length of time holding a job in the UAE is 4.7 years.

Using the figures above, the cost of turnover per worker is approximately Dhs15,180 annually. The turnover rate of 21% (approximately 657,930 workers) in a workforce of 3,113,000 equates to a ($2.7bn) Dhs9.9bn cost to business every year. For an average business of 12 workers the annual turnover cost is approximately ($10,400) Dhs38,250.

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Saturday, December 13- 2008 @ 16:29 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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