The High Cost of Employee Turnover and How to Minimize It
The price of employee turnover is often painfully high: Experts estimate that it can cost one and a half to more than twice a staffer's salary to find and train a replacement. Your organization's turnover rate is a metric often central to workforce planning and strategy.
Clearly, an employer should make every effort to keep its valuable employees. Indeed, staff retention represents one of the best competitive advantages your organization can have in the marketplace today.
National "quit rate" belies high expense of losing staff
Nationally, the job separation rate as of February 2014 is 3.2 percent, according to the U.S. Department of Labor's Bureau of Labor Statistics. This includes quits, layoffs, discharges and other separations. The quit rate alone — a measure of workers' willingness or ability to leave jobs — stands at 1.7 percent. The separation rate now virtually equals the current national hiring rate of 3.3 percent.
How does your organization's quit rate compare with the national average?
Reasons employees leave
Workers may voluntarily depart your organization for a myriad of reasons, but a poll reported in the Gallup Business Journal listed primary causes as: career advancement opportunities elsewhere, dissatisfaction with pay and/or benefits, poor fit with the role they were hired for or unhappiness with a supervisor. Other reasons for departure may be less concrete. Some individuals will leave a company they believe lacks a vision, fails to connect them to the "big picture," offers little motivation or is just plain dull.
The "hard" and "soft" costs of losing staff
Although the national separation rate seems low, every company experiencing employee turnover feels a significant financial impact. You expect the "hard" costs: posting the position to online job boards, hiring a headhunting firm, interviewing time, offering a cash incentive to staff for hiring a referral. But "soft" costs to fill openings can be as or more expensive, including:
- Reduced productivity – Existing staff is stretched to cover the vacant position or no one is available to fill the job, so less work is accomplished.
- Overworked remaining staff – Those who remain have their own jobs to do, as well as the duties of the vacant position, hurting morale and risking further turnover.
- Lost organizational wisdom – Departing employees take their know-how out the door: job-specific procedures, information, contacts, and possibly computer log-ins, passwords and online storage locations, as well.
- Training expenses – These can be obvious, such as sending the new hire to outside seminars or workshops. But staff time spent orienting and training new personnel affects your bottom line, too.
These losses in time and productivity mean that employee retention should figure high on your organization's priority list. Hiring the best people for the job and retaining those individuals — preserving the organization's investment — represent the best strategies to prevent turnover.
Keeping staff happy, settled
Many ingredients go into employee retention. Keeping valued workers, particularly in a small business, often means offering a range of incentives, including:
- A competitive benefits package that includes health and life insurance, and possibly a retirement savings plan;
- Perquisites such as flexible work hours, telecommuting, competitive vacation time and reasonable sick leave; and
- Gain-sharing, including employees in the company's financial success by granting raises or bonuses.
Find more strategies in this Paychex article.
Energy spent on employee retention represents an investment in your workforce, and can pay dividends far in excess of the time and effort to establish them. They can help motivate and stimulate your staff, and make your organization a desirable place to work ... for the long term.