For companies to thrive in the today's economy, finding and keeping the best employees is important. This is especially true for small businesses and non-profit organizations competing with larger companies and larger budgets for the best talent.
Happy employees help companies prosper
frequent voluntary turnover has a negative impact on employee morale, productivity, and business income. Recruiting and training a new employee requires staff time and money. According to the Bureau of Labor Statistics, the turnover is highest in areas such as trade and utilities, construction, retail, customer service, hospitality and service.
The cost of employee turnover
Studies on the cost of employee turnover is on the board of directors.
Some studies (as SHMR) predict that whenever a company replaces an employee, it costs the wages of 6 to 9 months on average. For a $ 40,000 per year making manager, which is $ 20,000 to $ 30,000 in recruitment and training costs
But others predict the cost even more -. The loss of an employee can cost up to 2x annual salary, especially for a high-salaried employee or executive level.
Turnover appears to vary pay and the role of the employee. For example, a CAP study found the average cost to replace an employee are:
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16% of the annual salary of a high turnover rate, low job paid (earning less than $ 30,000 per year). For example, the replacement cost of a retail employee $ 10 / hour would be $ 3,328.
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20% of the annual salary for mid-range positions (earning $ 30,000 to $ 50,000 per year). For example, the replacement cost of a $ 40k manager would be $ 8,000.
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Up to 213% of annual salary for the posts of highly qualified professionals. For example, the cost of replacing a CEO $ 100k is $ 213,000.
So what's the real cost of losing an employee?
In a recent article on employee retention, Josh Bersin of Bersin by Deloitte described the factors a company should take into account in calculating the "real" cost of losing an employee. These factors include:
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The cost of hiring a new employee, including advertising, interviewing, screening and hiring
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cost on the other. Boarding a new person, including training and time management.
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Loss of productivity ... it may take a new employee 1-2 years to reach the productivity of an existing person.
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lost engagement ... other employees who see high turnover tend to disengage and lose productivity.
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service and customer errors such new employees take longer and are often less able to solve problems.
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cost of training. For example, more likely 2-3 years a company invests 10-20% of salary or more employees in training
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Cultural impact ... Whenever someone a let others take the time to ask "why?"
one of the reasons why the actual cost of employee turnover is unknown, is the most companies do not have systems in place to monitor exit costs, recruiting, interviewing, hiring, orientation and training, lost productivity, dissatisfaction of the potential customer, or reduced business lost, administration costs, the lost expertise, etc. It takes collaboration between departments (HR, finance, operations), means to measure these costs, and reporting mechanisms.
The best practices on employee retention
So what can you do about employee retention? We recently outlined seven tips to employee retention. Some of these employee retention tips include:
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Benchmark your employee retention rate
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Using proven retention strategies, not conjectures
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does not assume employees are happy (create high-feedback environment)
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implement a health benefits program such as a traditional health plan or health benefits defined contribution
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provide different benefits for different employees (focusing on high value, expensive to replace employees)
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Conduct exit interviews
Editor's note: This article was originally published in August 2013.
What do you think are key factors in the cost of losing an employee? What are your tips for employee retention? Join the discussion by leaving a comment below.
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