Revolving Doors: An Analysis Of The UAE's High Staff Turnover Rate
Employees in the UAE are changing jobs more often than the rest of the world. What’s behind this? As an employer, how do you know if you are losing more employees than you should be? And most importantly, when does high employee turnover really start costing your business?
These questions are top of mind for any HR department looking at retention planning. Because while it’s true that staff turnover affects companies of all sizes across the globe, regularly switching employers is particularly prevalant here in the UAE.
The numbers back this up: worldwide, employee turnover rates are predicted to rise to 23.4% by 2018, up from 20.6% in 2012. Meanwhile, the Hays GCC 2016 Salary & Employment Report shows 31% of employees based in the UAE changing employers in 2015, with 57% intending to do so in 2016- a much higher rate than the global one.
The reasons for leaving employment are universal: perceived low salaries, lack of job security and poor career prospects are major drivers. So are these behind the higher rates in the UAE?
Well, one theory is supply and demand: with such a high number of skilled workers finding employment in the UAE in recent years, supply has outstripped demand for the first time, and caused a plateau in wages. The fact that 48% of UAE employees did not receive a pay rise in 2015 certainly adds weight to this school of thought. What’s more, a staggering 83% of UAE workers would seriously consider resigning from their current position to seek better training opportunities with another employer. So lack of career progression is certainly one factor behind the UAE workforce jumping ship more often.
But is high staff turnover always bad news?
The challenges of high staff turnover for your business
The most obvious negative impact of high turnover is the costs involved with having to continuously find, hire and train new staff. Aside from the resources lost to the recruitment process, businesses in the UAE are estimated to spend AED9.9 billion (US$2.7 billion) annually as a result of staff turnover, according to figures from Bayt.com and YouGov Siraj.
The cost of replacing a single employee is an eye-opener. The same report puts it at AED15,180 ($4,125). That’s for one employee. Now multiply that figure by the number of new recruits you have per year.
But it doesn’t end there. We can add in expenses of advertising and publicizing the vacancy. There are also critical referencing and background checks of the candidates, along with resources needed to conduct interviews. Once hired, there is further investment including new equipment, training and so on. Plus, as the vast majority of the workforce here in the UAE is made up of foreign nationals, costs for visas and accommodation may also be factored in.
A study by The Rainmaker Group estimates the total cost of replacing an unskilled worker is approximately half of that employee’s annual salary. With technically skilled or higher level employees, the potential costs might be as much as three to five times their annual salary. So there’s clearly a considerable financial hit each time a position at any level is vacated.
As much as it may impact the employer in the wallet, it can also have a detrimental effect on the performance of your teams. To produce consistently good results, you need a settled, productive team. If that team is regularly disrupted by key players leaving and inexperienced replacements coming in, the output naturally suffers. A 2007 Harvard Business School paper found that poor staff retention had a negative impact on both profit margins and customer service.
Worse still is a company not replacing leavers and trying to continue normal operations with fewer personnel than required. The daily tasks that were performed by former employees get distributed among those who remain– a quick path to a demoralized workforce who may well be job-hunting very soon.
The benefits of high employee turnover
Are there ever times when high turnover of staff has positive results? It’s an interesting take on what can seem like a doom and gloom scenario, but there are some positives that can be taken from this.
New employees have the potential to bring different skills, fresh ideas and new contacts to your organization. They are often less resistant to change, particularly useful if you are part way through organizational re-design. So if your company suffers high turnover rates, then try and use it to your advantage. Turnover of staff allows for flexibility in the way you operate– and regular movement of people in and out (or sideways) in your organization may uncover some hidden talent that has been overlooked.
So the inconvenience of staff turnover can be mitigated somewhat if you take the view that it allows you to review your current structure, and possibly reassign staff and responsibilities to sharpen your productivity.
Also, we’re assuming employees who leave are all high-caliber productive people. There’s just as much chance that the "leaver" could be disgruntled, someone who regularly upsets the chemistry of your team. Once they go, your group may be more positive and productive.
Finally, there is a school of thought that suggests companies with a static employment landscape can fall prey to “The Peter Principle.” Essentially, this creates an organization where a significant number of long-term employees will eventually be promoted to a level beyond their abilities, thus rendering them incompetent. In this case, higher employee turnover may have some benefits.
How to tackle high employee turnover in your organization
We’ve seen both the problems and benefits that high staff turnover brings. While turnover and the associated expense can never be eradicated completely, a resourceful and dynamic HR operation can work to bring it to acceptable and manageable levels. The factors that make UAE workers look elsewhere for employment are clear, so why not use that information as a cornerstone of your retention planning?
Training and development programs are great motivational tools. Yes, there’s always the risk that employees will build their skill base with you and then leave for a competitor. It’s an age-old concern. But here’s another way of looking at it: what if you don’t train them and they stay?
If your employees are motivated, adequately compensated and have career development opportunities, then retention should take care of itself. There will always be some turnover that will need to be accounted for in your annual planning. But if your preparation to cope with such a scenario is effective, it doesn’t have to be disastrous. It can even be a catalyst for positive change.
So by planning effectively and operating a constructive retention program that pays attention to the feedback of employees, you can better manage your turnover numbers, reduce costs, and even become a more productive operation.
Carole Khalife is Head of Human Capital and Employee Benefits at Al Futtaim Willis.
Carole earned her law degree in 2003 before starting her career in the field of medical insurance, joining one of the largest insurance groups in the Levant and GCC region. Since then she has built up extensive experience in the MENA region, supporting some of the largest regional and international organizations in the area of risk management, with a specific focus on medical and life insurance.
Carole joined Al Futtaim Willis in 2015, a joint venture between the Al Futtaim group (UAE) and Willis Towers Watson, a leading global advisory. She supports clients in turning risk into a path for growth through risk management and personalized approaches, customized according to each company’s core business. Carole is passionate about innovation, people and continuous improvement.