Posted on November 22, 2019 by admin
Some people are still mistakenly under the impression that employee turnover is a good thing. What a myth this is! Sure, it sometimes a good thing to remove the occasional bad egg from one’s workplace in order to bring in more productive workers, but many managers are baffled when they learn about the true costs of employee turnover in the end. It can often be much higher than one initially thought!
The True Hidden Costs of Employee Turnover
It has been shown that as much as 50% of employees are not sure whether they will continue to work at their organization for more than a year, especially if bosses don’t demonstrate a high level of appreciation for their work. Over time, employees who leave the company will have to be replaced with new workers who will have to be retrained into the new working environment.
Here are just a few of the many expenses that come into play each time an employee is replaced:
- Hiring expenses, which include marketing & travel expenses.
- Training costs.
- Relocation costs
- Travel costs for sales positions.
- Lost time and productivity during the search for new employees.
- Lost time and productivity due to self-confidence issues.
- Mistakes made by the new employee in the early stages of his employment.
- Time and resources spent interviewing new employees.
After putting all the pieces together, you will discover that it can take as much as $3500 to replace just one $8/hr. employee after factoring in the costs of interviewing, hiring, recruiting, training, reduced productivity and other factors – and many people still feel that this number, $3500, is at the low end of the spectrum, as the costs of such factors rise each year.
The cost of replacing those employees making $50,000 a year can be as high as $60,000. (For a rough ballpark figure and a rule of thumb, multiply the salary by 125%). Whatever the actual amount turns out to be, it helps to realize that the overall costs of employee turnover almost always exceed their initial compensation amounts.
Why Isn’t Employee Turnover Taken More Seriously?
Most management teams report that they never get an evaluation of the costs that were involved in employee turnover that occurs at their company. Either the company doesn’t measure them correctly or they simply fail to report them to higher spheres of management. Worse yet, some companies have no process in place to tabulate the costs. One survey showed that nearly half of companies used their “intuition” to gauge the actual costs of employee turnover in their company. Furthermore, many of these costs continuously remain underestimated, because there is lack of an established consensus as to the best way to generate and measure the statistics.
Some companies blame the whole process on the HR team who is already busy recruiting the new employees and also doesn’t have the time to put a system in place that measures the costs involved in employee turnover. It’s really up to management to put such a system in place.
The Reason as to Why Employees Leave
Some companies get into the habit of implementing many solutions to increase the level of employee retention within their organizations. However, it may be a better solution to concentrate only on the effective solutions. Having too many solutions, even if they are great solutions, will only weaken your success and diffuse your resources.
It is imperative that the company has a regular system of assessment in place. By having a system in place, the huge costs of employee turnover can be mitigated over time. For example, using an exit survey for employees currently scheduled to leave your organization can be a valuable way to find out the reasons as to why they want to leave in the first place, and can help your management team come up with effective solutions to prevent this from happening in the future.
Strategies To Improve Employee Retention
First of all, don’t wait until the costs of turnover become too high and unmanageable. A retention program should be put in place to find out the exact reasons as to why employees are leaving and what can be done to hold the employees who may be thinking about leaving for the same reasons. The sooner this is done the better.
Second, it is important to regularly survey your company’s top performers to find out what they like and don’t like about working. You can even ask questions about whether they have any plans to leave for the future and what kind of competitive job offers may attract them into doing so. Other questions can be used to help you find out what can be done to improve their level of satisfaction on the workplace. Their answers are the golden keys you need to help your company thrive and increase employee retention.
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