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The Real Costs Of Employee Turnover

Posted by Leslie Ruhland on Aug 27, 2018 8:40:57 AM
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Keeping business costs down is a primary function of management in any organization. But some costs are not easily recognized, such as employee turnover, and these costs can hurt a business that isn't actively managing them.



How much does it cost a business when an employee leaves or has to be let go? One figure, from the US Department of Labor and Statistics, estimates it can cost up to 33 percent of the workers total pay including salary and benefits.

In addition, when a disgruntled co-worker leaves a company or has to be fired, this has an impact on the rest of the workforce, sometimes causing others to reconsider their own commitment or sense of  “job satisfaction."

Because of these tangible and intangible cost, HR best practices include training for hiring managers to prioritize employee retention. In addition to improved recruiting, hiring and onboarding processes,  employers and managers need to understand the why employees really leave a workplace.

Three Main Reasons for Employee Turnover

Studies have shown that there are a few key reasons that routinely cause employee turnover. While there can be any number of instances where there was discord with a manager or co-worker, or simply an better offer made to an employee, a study by BambooHR noted that the three main reasons employees leave a company are as follows:

  1. Lack of advancement
  2. Poor work/life balance
  3. Money

Contrary to what many employers, managers, and even other employees might believe, money is not as significant a factor in job dissatisfaction as is lacking an opportunity to move up or desiring a healthier balance between work and personal lives.

In addition, the study noted that there were five top drivers that caused disengaged workers to quit their jobs:

  • Inflexibility of management
  • Difficult co-workers
  • Not being trusted by management
  • Being expected to work “off the clock”
  • Managers blaming employees for mistakes

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The Real Cost of Employee Turnover

According to an article at on the costs of employee turnover,

Some studies (such as SHRM) predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $40,000 a year, that's $20,000 to $30,000 in recruiting and training expenses.

But others predict the cost is even more—that losing a salaried employee can cost as much as twice their annual salary, especially for a high-earner or executive-level employee.

The bottom line is that even losing entry-level employees earning at or slightly above minimum wage can be costly for employers, and that the intangible, or "soft" costs, can be as much as the more easily measured costs.

Here's a graphic that illustrates some of the costs involved:

employee turnover - the real costs

You Can Reduce Employee Turnover Even Before Hiring

According to the SHRM Foundation, there are a number of fiscal benefits to be had with an effective onboarding process in place:

Beyond the short-term issues related to employees’ initial adjustments, many long-term outcomes of onboarding affect a firm’s bottom line. When surveyed, organizations perceive effective onboarding as improving retention rates, time to productivity and overall customer satisfaction.

There are long-term outcomes of good onboarding for new hires, as well, including increased job satisfaction and company loyalty and employee commitment.

The onboarding process, when done correctly, can result in greater overall job satisfaction, significantly lower employee turnover, higher productivity and performance levels, as well as a positive workplace environment.

Ideally, a new hire onboarding process begins even before a new employee is hired. This is because one of the fundamental elements of a successful hiring and onboarding process is ensuring that the right employee coming on board.

Employees Are an Investment in your Organization

It's not too late to begin making adjustments or improvements to your recruiting, hiring and onboarding processes. In fact, this could be a perfect time to review your processes with the goal of improving them and your overall employee development practices.

In addition to a growing and demanding role in recruiting, hiring, and continually training employees, the HR staff is responsible for other functions they are typically tasked with such as payroll management, tax filings, employee records compliance, and so forth.

Outsourcing is increasingly becoming a cost-effective and strategic option. Accuchex can help you in managing your HR needs, payroll processes, and staying on top of compliance demands. Get your Free Download: Payroll Outsourcing Guide to help you make an informed decision or call Accuchex Payroll Management Services at 877-422-2824.

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Topics: employee onboarding, employee turnover, employee engagement, management practices, business development

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