Losing an experienced member of staff isn’t just about recruiting a replacement — it can seriously damage your bottom line in many overlooked ways. Discover the key person dependency cost, the value of key person insurance, and why Key Person Cover is a business-critical investment.

1. Recruitment Expenses

• Advertising & agency fees: In the UK, posting jobs can cost £500–1,500, while recruitment agencies may charge 15–30% of annual salary—e.g. £6,000–12,000 for a £40,000 role
• Internal hiring costs: Around 40 hours of HR and management time (~£1,000) per hire

2. Onboarding & Training

• Formal training: £2,000–5,000 in upfront costs
• Lost productivity: It often takes new employees 3–6 months to reach full effectiveness—this gap alone can cost £12,500–25,000 for a mid‑level role
• Mentoring time: If experienced staff spend 20 hours onboarding (£35/hour), that’s an extra £700

3. Opportunity & Productivity Costs

• Direct output losses: Revenue dips during transitions may reach £10,000–30,000
• Wider team impact: If morale dips or workload shifts, productivity reductions of 5–10% in a £1 million team equate to £50,000–100,000
• Institutional knowledge loss: Oxford Economics reported ~28 weeks until full productivity—with a cost of £25,181 alone

4. Hidden & Long-Term Costs

• Brand damage and future hire challenges: High turnover can hike recruitment spend by 10–15%
• Customer churn: Losing relationships, especially those held by senior staff, can cost £5,000–15,000 per lost client
• Total cost per hire: All told, replacement can cost £30,000–£100,000, especially for senior or technical roles

Key Person Cover: Why It’s a Business Game-Changer

Key Person Cover is business-owned life insurance (and optional critical illness or disability cover) designed to pay a lump sum if a designated individual dies or is critically ill. It transforms a potential loss into a strategic financial buffer.

What makes it essential?

• Instant financial stability to cover recruitment, training, and interim hiring costs
• Safeguards revenue flow, bridging the productivity gap until a replacement is operational
• Protects debt obligations, especially when the key person underpins loan guarantees
• Boosts confidence among shareholders, investors, and lenders by showing preparedness
• Peace of mind that your business can weather the unexpected

How much cover is enough?

• Salary multiple approach: Typically 7–10× gross salary for life cover, and 5× for critical illness or disability
• Profit-based formula: 2× gross profit or 5× net profit attributed to the key individual
• Turnover-based model: (Salary ÷ total payroll) × gross profit × years to recover up to five years

Case examples:

• Senior Sales Director (£75k): Replacement value could be £60k–100k+; cover recommended at 7–10× salary means £525k–750k
• Technical Lead (£90k): Replacement may cost 80–200% of salary; profit-based coverage method offers sufficient buffer
• Mid-level Manager (£50k): Replacement cost usually around £30k; 10× salary would target £500k coverage

The Compelling Numbers: Key Person Cover vs. Replacement Cost

Scenario	Replacement Cost Estimate	Key Person Cover Aspect
Senior sales director (£75k)	£60k–100k+ (advertising, agencies, lost deals, training)	Cover could mirror 7–10× salary (i.e. £525k–750k)
Technical lead (£90k)	80%–200% of salary (£72k–180k)	Profit-based calculation ensures adequate buffer
Mid-level manager (£50k)	~£30k average replacement cost	Salary multiple (e.g. 10×) = £500k coverage

The question isn’t whether you can afford Key Person Cover—it’s whether you can afford not to have it.

Why Choose Broadbench for Key Person Cover Advice?

When it comes to protecting your business, Broadbench stands out as a partner you can trust:

• Specialist insight: Their advisors understand the full financial impact of replacing key staff and how insurance can mitigate those losses
• Tailored cover: They help businesses calculate the right amount using profit, salary, and turnover metrics
• Strategic planning: Broadbench weaves Key Person Cover into overall financial structures—debt protection, shareholder value, continuity
• Trusted guidance: Directors and owners receive clear explanations, policy comparisons, and ongoing reviews as the business evolves
• Excellent client feedback: They are rated as 5-stars on Trustpilot

Key Takeaways

• Replacing experienced staff is exponentially costly—recruitment, lost output, client risk, and team morale can drive replacement costs to £100k+ per person
• Key Person Cover provides an immediate safety net, supporting recruitment, continuity, loan repayment, and operational resilience
• Broadbench offers expert, bespoke advice, ensuring your business secures the right level and type of cover to match its true financial risk

Final Thought

When your business depends on high-calibre talent, you’re not just insuring a person—you’re insuring your financial stability and future success. Broadbench can guide you every step of the way to securing that coverage—and, crucially, peace of mind.

Protect your greatest asset—your people—to ensure your business continues to thrive. Let Broadbench help you choose the right coverage today.

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Sources:

David Poole – Escalating cost of replacing sales employees

The High cost of employee turnover

£30k to replace a staff member

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