Northline Support: pay or redesign the job?
Northline Support runs a 180-seat customer service centre. Average salary is £23,500; annual labour turnover is 34%, against a sector average of 19%. Each leaver costs about £4,300 in recruitment, training and lost productivity. Absence is 9%, and the engagement survey shows low scores for shift flexibility and career progression. The HR budget for next year is £200,000. Two proposals are being debated. Proposal A is a 6% across-the-board pay rise; managers expect turnover to fall to 26%. Proposal B is a flexible-shift system plus a team-leader coaching programme costing £142,000 a year; a six-month pilot in one team cut turnover by 14 percentage points, and managers assume the same effect centre-wide. Team leaders currently earn £29,000, only £5,500 more than agents. The operations director warns that any proposal must not increase average handling time, which is already 7.2 minutes against a 6.5-minute target.
1. Calculate the current annual cost of labour turnover and the net annual cost of each proposal.
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Current turnover cost: 180 × 34% = 61.2 leavers × £4,300 = £263,160.
Proposal A: pay cost = 180 × £23,500 × 6% = £253,800. Turnover at 26% = 46.8 leavers × £4,300 = £201,240. Saving = £61,920. Net cost = £253,800 − £61,920 = £191,880.
Proposal B: cost = £142,000. Turnover at 20% = 36 leavers × £4,300 = £154,800. Saving = £263,160 − £154,800 = £108,360. Net cost = £142,000 − £108,360 = £33,640.
B is £158,240 cheaper than A on a net basis and is comfortably inside the £200,000 budget. A is inside the budget only if the 26% turnover assumption holds; if turnover stays at 34%, A costs £253,800 and breaches the budget by £53,800. B's larger saving comes from attacking the causes of exit, not only the symptom of pay.
2. Evaluate the non-financial factors and recommend which proposal Northline should implement.
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Proposal A creates pay compression: agents would rise to £24,910, leaving team leaders on £29,000 only £4,090 more. That can demotivate supervisors and weaken the coaching quality that drives average handling time. A also does nothing about progression, one of the survey's weakest scores, so it may buy short-term retention without solving the exit reason.
Proposal B directly addresses flexibility and career development, and the pilot provides credible evidence. Risks: the 14-point pilot effect may not scale; coaching quality may vary; new shift patterns may complicate breaks and raise AHT above 7.2 minutes. The £142,000 is recurring, but so is the pay rise.
Recommendation: implement B with guardrails. Its net cost is £33,640, it targets the actual drivers of turnover, and it leaves £166,360 of the budget for contingencies. Set a 12-month review with turnover, absence and AHT targets, and allocate up to £50,000 for targeted team-leader pay adjustments to protect pay differentials. A should be rejected as the primary strategy because its financial case depends on an untested turnover assumption and it creates a supervisory retention problem.