A high employee turnover rate can be crippling to your company. Not only does it put a damper on morale and culture, it can be incredibly costly from a financial standpoint. Let’s take a closer look at this issue to see just how much it can cost your business.
The Full Extent of the Cost
For most employers, the first costs that come to mind include things like advertising, interviewing, onboarding and training. And those are certainly contributing factors. But it actually goes much deeper, and you also have to take into account:
- Lost productivity when you’re constantly bringing on new employees
- Reduced engagement for workers who remain at their jobs (They may lose their enthusiasm when other job positions are revolving doors)
- Increased mistakes when you lack seasoned experts
- The impact it can have on your culture (For instance, you may experience lower brand equity)
What Research Says
A study by the Center for American Progress came up with some concrete numbers regarding the cost of employee turnover. According to their findings, it boils down to the type of position in question and the skill level required to fill it.
- The typical cost of turnover for positions earning less than $30,000 annually is 16 percent of an employee’s annual salary.
- For positions earning between $30,000 and $50,000 a year, it’s 20 percent of an employee’s annual salary.
- Highly paid jobs and those at the senior or executive levels tend to have disproportionately high turnover costs with a percentage of salary up to 213 percent.
So the higher the position, the more costly the impact. Even for someone earning $25,000 a year, you can still expect it to cost $4,000. And when this happens on the large scale, it can really cut into your profitability and negatively affect your company’s bottom line.
The Impact of Measuring Employee Retention
Keeping tabs on your employee retention is critical because it lets you know when it’s taken a turn for the worse. That way you’ll know when measures need to be taken in order to lower it. But how do you calculate this?
PeopleKeep offers a simple formula. “Divide the number of employees who left during a period by the total number of employees at the end of a period to get the percentage.” You can learn more about this process and get an example in this resource. As for a benchmark, they report that 70 to 85 percent is the average retention rate.
Employee turnover is something that should be taken seriously. Therefore, it’s important to familiarize yourself with the costs it creates and determine if your company’s turnover rate is higher than average.
Need help with recruiting? Contact the professionals at PrideStaff DFW today.