For many businesses, employee turnover is an increasing issue. Having a high employee turnover can have severe impacts on your company, affecting things such as productivity, employee morale, and company revenue.
Depending on the level of the employer who left, the effects will trickle down to the bottom line.
Of course, employee turnover is something that will occur throughout the year however, if your company is suffering from a high employee turnover rate, than it’s a good idea to evaluate why the high employee turnover is occurring and how you can correct the problem.
Understanding why employees are leaving your company, will also help calculate the employee turnover costs.
The Real Costs Of Employee Turnover
Studies on the costs of employee turnover are all over the board. There are many factors contributed to employee turnover costs, and one of the reasons why it’s an unknown number is because many employers don’t have an employee exit tracking system in place.
Costs Related To Employee Turnover:
- The cost of hiring a new employee; job advertisements, interviewing, recruiting, background screenings, and hiring.
- New employee onboarding, training, and time management.
- Lack of productivity in the office amongst employees.
- Cost of employee errors and customer service.
- 16% of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328.
- 20% of annual salary for mid-range positions (earning $30,000 to $50,000 a year). For example, the cost to replace a $40k manager would be $8,000.
- Up to 213% of annual salary for highly educated executive positions. For example, the cost to replace a $100k CEO is $213,000.
Tips On How To Calculate Employee Turnover Costs
Most of the time, employee turnover costs are often described with generic numbers based on averages. However, those ballpark estimates most likely don’t accurately describe your specific organization, department, or team.
There are ways you can have a more detailed idea of what the cost of an exiting employee is costing your company.
- How much time did you spend filling the position?
- How much time was lost or wasted before the employee left?
- How much are you spending on paying existing employees to make up for the work (overtime, additional shifts)?
- Hours spent onboarding the new employees.
Time is money. All the time spend put into solving all of these issues each time an employee leaves the company adds up.
Having A Strategy To Reduce Employee Turnover
There are many ways you can reduce employee turnover. If possible, track the employees who left, their reason, and how long they worked for the company. Over time, see if you notice a trend.
Having open lines with your employees and asking for their feedback after an employee leaves can also be helpful, just be sure you take into consideration who you’re asking. If you focus on the entry level or low performing employees, you may have different feedback than asking high level or executive employees.
How Employee Turnover Costs Affect Your Business
Employee turnover costs can affect a company in a devastating way if they aren’t prepared. Employee retention is an important tactic in having a successful business. It’s a good idea to evaluate the reasons your business is suffering from high employee turnover, and how you can prevent it from continuing.
When you lose an employee, it’s important to understand the costs involved. From there you’ll be able to better streamline the process of hiring a new employee and cut down on those costs.