As you move up in the business world, you come to expect unwelcome setbacks and challenges. One of the biggest problems you will probably face most often is when an employee decides to leave for one reason or another. Even if you work for a large corporation, an employee leaving can cause a much higher impact than you might expect. The absence of a single employee can create a ripple effect that spreads to every corner of your business. Today I’m going to break down how turnover affects your business and the actual price tag that comes with replacing your former employees.
This first cost of employee turnover is probably the most obvious. Successful businesses typically employ the appropriate amount of people to meet the ideal cost of employment to work output ratio. This means when one employee leaves, the remaining workers are charged with picking up the slack. This not only takes time away from these employees’ own responsibilities but also creates a higher chance of things falling through the cracks. By the time the employee is replaced, the new recruit won’t likely have the job knowledge that is specific to that position and it will take some time for them to get up to speed. These cumulative setbacks can be a huge damper on company productivity and ultimately cost you a lot of money.
Now that the former employee’s workload is divided among their coworkers, it stands to reason that the remaining staff will experience higher stress levels and, in turn, decreased morale. These employees could become discouraged or dissatisfied with their jobs and, if you’re not careful, once employee leaving could snowball into more. The longer it takes to find a replacement, the more of a chance there is that your employees will become less engaged. This further decreases productivity and the cost that comes along with it.
Recruiting and Onboarding Costs
Whether your company is in the habit of hiring recruiters to find replacement employees or you undergo the process internally, there are a number of costs that take place through the interviewing period. Ask any hiring manager and they’ll tell you the amount of time it takes, from start to finish, to find, interview, hire, and onboard a single employee. After that, you have the more tangible costs of seminars, certifications, and training sessions required to get the new hire up to speed.
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Many of the costs discussed are “hidden,” meaning you won’t be writing massive checks each time an employee leaves. However, there are a number of statistics that show you just how big of an impact employee turnover can have on your bottom line. According to Small Business Charon, the average cost to replace an employee that is at the median wage in the U.S. is $17,000. Additionally, ERE Recruiting Intelligence claims that you can expect to spend 150% of the former employee’s salary to replace him or her. These numbers can really add up when you look at your retention rates. So what can we do about it? Tune in next week to learn How to Decrease Your Employee Turnover.