The real cost of employee turnover.
In human resource terms, employee turnover is a measurement of how long your employees stay with your company and how often you have to replace them. Any time an employee leaves your company, for any reason, they are called a turnover or separation.
Calculating Employee turnover
The average cost to replace an employee is about 50 percent of that employee’s annual salary, depending on their level of expertise or the level of skill needed to perform their job duties.
The chart below indicates the breakdown of replacement costs that an employer might incur to replace certain levels of employees:
But, what is the real cost of losing an employee?
Money is a great indicator to outline this problem. But there’s more. In an article on employee retention, Josh Bersin of Bersin by Deloitte outlined factors a business should consider in calculating the “real” cost of losing an employee. These factors include:
- The cost of hiring a new employee including the advertising, interviewing, screening, and hiring.
- Cost of on-boarding a new person including training and management time.
- Lost productivity… it may take a new employee 1–2 years to reach the productivity of an existing person.
- Lost engagement… other employees who see high turnover tend to disengage and lose productivity.
- Customer service and errors, for example new employees take longer and are often less adept at solving problems.
- Training cost. For example, over 2–3 years a business likely invests 10–20% of an employee’s salary or more in training
- Cultural impact… Whenever someone leaves others take time to ask “why?”
So, what can you do about employee retention?
Some of these employee retention tips include:
- Benchmark your employee retention rate.
- Use proven retention strategies, not guesswork.
- Don’t assume employees are happy, and create a high-feedback environment by running One-on-One meetings.
- Provide different benefits for different employees (focusing on the high-value, expensive to replace employees)
Steer is a Performance Management system for Remote teams, that helps Managers and Employees have weekly conversations, to know where the roadblocks are, which are the goals achieved and share feedback. Improve your leadership and management skills, and try Steer now for free!
