It is an inconvenience when someone quits or is let go, but it is often underestimated of how expensive it can really be. Employee salaries can range from 18% to 52% of a company’s operating budget. Having a high or low performing team can make or break your business, so if you’re not doing so already it is wise to spend a more time in the hiring process to make sure you hire the right person. This was something that I had to learn the hard way over the years. Here is some information I dug up.
In the United States, the annual turnover rate for all industry sectors averaged 39.6% before seasonal adjustments, during the same period the Leisure and Hospitality sector experienced an average annual rate of 74.6%.
When accounting for the employee turnover costs (both real costs, such as time taken to select and recruit a replacement, and also opportunity costs, such as lost productivity), the cost of employee turnover to for-profit organizations has been estimated to be up to 150% of the employees’ remuneration package.There are both direct and indirect costs. Direct costs relate to the leaving costs, replacement costs and transitions costs, and indirect costs relate to the loss of production, reduced performance levels, unnecessary overtime and low morale.
Labour turnover is equal to the number of employees leaving, divided by the average total number of employees, multiplied by 100 (in order to give a percentage value). The number of employees leaving and the total number of employees are measured over one calendar year.
(# people that left during year ÷# people at start of year + # people still there at end year ÷2) x100
Some tips How to prevent turnover:
Some things that can help you during the hiring process are performing background checks and credit checks ( depending on the position), have the candidates meet with at least 2 people in the company and get a second opinion. The second opinion often sees things you may not. Make sure to ask situational questions during the interview and always check references. Another smart thing to do is benchmark the position and have the last 2-3 top candidates take a behavioral assessment or workplace motivators assessment to help you understand some of the strengths, weaknesses and learn what motivates them. These assessments help you learn things about the candidate that won’t be discovered in a face to face interview and will tell you things the candidate may not. Remember the saying, “no one is as close to perfection as they are during an interview.”
Good employees are essential in running a successful business; without them the business will suffer. However, more and more employers today are finding that employees remain for approximately 23 to 24 months, according to the Bureau of Labor Statistics. In the USA the Employment Policy Foundation states that it costs a company an average of $10,000 – $15,000 per employee, which includes separation costs, including paperwork, unemployment; vacancy costs, including overtime or temporary employees; and replacement costs including advertisement, interview time, relocation, training, and decreased productivity when colleagues depart. Providing a stimulating workplace environment, which fosters happy, motivated and empowered individuals, lowers employee turnover and absentee rates. Promoting a work environment that fosters personal and professional growth promotes harmony and encouragement on all levels, so the effects are felt company wide.
Continual training and reinforcement develops a work force that is competent, consistent, competitive, effective and efficient. Beginning on the first day of work, providing the individual with the necessary skills to perform their job is important. Before the first day, it is important the interview and hiring process expose new hires to an explanation of the company, so individuals know whether the job is their best choice. Networking and strategizing within the company provides ongoing performance management and helps build relationships among co-workers. It is also important to motivate employees to focus on customer success, profitable growth and the company well-being Employers can keep their employees informed and involved by including them in future plans, new purchases, policy changes, as well as introducing new employees to the employees who have gone above and beyond in meetings. Early engagement and engagement along the way, shows employees they are valuable through information or recognition rewards, making them feel included.
When companies hire the best people, new talent hired and veterans are enabled to reach company goals, maximizing the investment of each employee. Taking the time to listen to employees and making them feel involved will create loyalty, in turn reducing turnover allowing for growth.