Employee turnover costs are hard to pin down. Many employers don’t have the time to calculate their exact costs for replacing a worker since they the cost seems to be minimal and unavoidable. The truth is, however, that HR experts estimate that the cost of replacing one employee is at least 25 percent of that employee’s annual salary. These costs include:
- Cost of exit interview
- Increase in unemployment tax
- Separation pay
- Administrative costs
- Placing job ads
- Cost of employees’ time for interviewing process
- Background check cost
- Bonuses and administrative costs
- Cost of training material
- Cost of trainers time
- Time it takes new employee to ramp up
Intangible costs also include the stress a short staff puts on other workers, interrupted client dialogue and lost company knowledge. If you add it all up, you are probably losing much more than you thought on each employee that leaves your company, so doesn’t it make sense to start doing something about it?
The solution to reducing turnover is different for every company. The most important thing you need to do is find out exactly why employees are not happy with your company and fix it. Are employees overworked? Do they hate the work environment? Do they want more competitive salary and benefits? You may not see a dramatic change within a couple weeks or even months, but whatever money you invest in your employees in the short term, you’ll see multiplied in the long term with reduced turnover and higher profits.
Effectively communicating to employees through employee benefit statements can help reduce turnover, as well. Ensuring employees are aware of the company costs associated with keeping them at the job can play a significant role in whether or not the DO stay at the job.
Would love to hear your thoughts and experiences on the costs associated with employee turnover in the comments below!