$6 billion – the hidden cost of 90 day Notice Period to companies, economy

There is no rationale as to why Indian companies need to have a 90 day Notice Period. The same organisations that have 90 days as their notice period expect candidates to join within a few weeks which doesn’t really add up

The pandemic has turned the talent market more competitive than ever before. Organisations are battling for the top available talent. They want to hold on to industry expertise as long as possible and have sufficient time to search for a replacement if a top employee decides to leave. This situation has led to excruciatingly long Notice Periods, often unproductive, becoming increasingly common among varied sectors.

Although there is no universal rule as to when you should give a notice period and for how long, high-level leadership positions and highly technical jobs often see a Notice Period of more than 30 days which can definitely be considered long.

But why do organisations have long notice periods?

Many organisations believe that long notice periods deter other potential employers from seeking out their employees due to the wait time. Secondly, they also believe a long notice period ensures enough time for work transition. The beliefs have endured because no one has really quantified the impact of these archaic policies, which in reality is quite adverse.

Is a 90 day Notice period effective?

A long notice period fails on multiple accounts:

  • No change in employee attrition rate: Many organisations often hope to control their retention rates by buying or holding back with a longer notice period. However, this has not shown to have any impact on employee attrition for organisation with longer notice periods.
  • Loss of employee productivity: An outgoing employee has very little motivation to contribute to the organisation. Even the most conscientious employees will contribute productively for at most a month, after which they are bound to lose interest. During their notice periods, employees can also be a source of distraction for other active employees.
  • Encourages peer departure: Most outgoing employees will share their new compensation details (typically 20-50% hike). So, the outgoing employees and his/her new ‘hiked’ salary range serve as a new salary benchmark to the others. As more employees get motivated to seek greener pastures, longer notice periods inadvertently end up giving more time to exiting employees to influence other colleagues.
  • Adverse impact on organisational morale: Once an employee has decided to leave, they tend to emotionally disconnect. In many cases the outgoing employee may not be exiting on the best note and may thus seed discontent and disharmony. Unfortunately, there is no existing system for the management or the human resources team to exercise much control in such a situation

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