Turnover costs of employees depend on the complexity of the job. The more complex the job is the higher the turnover cost for the company. It is important to understand what contributes to turnover costs and how to reduce them.
1. Less Productive Staff
High turnover costs come with less productive staff. The staff is down one person due to the position being empty. This means that the work that they were doing is either not being done or having to be dispersed among other employees. More than likely, the most important tasks will get done but the smaller or little tasks will fall through. Employees taking on the responsibilities from the vacant position could become stressed. As a result of this stress, the quality of their work will go down.
2. Replacement Expenses
Replacing an employee that left the company is costly. For example, posting job advertisements in the right places to attract the right kind of employee can be expensive. Interview processes themselves are lengthy when companies take the time to ask the right questions in order to compare and contrast each candidate. Usually, the interviewers are leaders of the company which means they will be taking time out of their workday to conduct the interviews. So, altogether the company’s valuable staff members are spending more time trying to fill the position vs. implementing other value-added activities.
3. Training Costs
You have picked that perfect employee and they accepted the position. The turnover costs still continue to accumulate at this stage. New hires are not going to be as productive as that seasoned employee that left. It will take a lot of time for them to get a handle on everything. Experts, such as Josh Bersin, state that it can sometimes take a new hire two entire years to equal the productivity of an existing employee.
On-boarding an employee can be one of the most expensive costs when replacing a former worker. Teaching the new hire about the company structure, processes, equipment, expectations, and maybe even complicated software takes a large amount of time. In addition, employees who currently work for the company are the ones that are usually conducting the training sessions. This cuts down on their workday to complete their daily tasks and can lead to less productivity.
5 Tips for Reducing Turnover Costs
- Ensure that the candidate taking the available position is a good fit for the company’s culture during the interview stage. It is vital that you pick the right candidate from the start.
- Encourage and praise new hires for their good work. This will increase their confidence in their new position.
- Keep the environment positive. Most employees will stick around if they feel the environment is fun and happy.
- New hires want to know about career paths. Communicate how they could grow with the company and have check-ins to discuss their strengths and their weaknesses.
- Offering the correct benefits and compensation is also a way to reduce turnover rates. Maybe include flexible hours or additional ways to earn bonuses.
