It is a well known fact that employee turnover is a high cost for companies, but the true extended costs and the many ways high turnover impacts businesses extend well beyond just the “hard” costs of recruiting and hiring. To be successful, businesses must not only find the best employees, but also train and support them to keep them engaged.

It is important for employers to consider all of the costs of high turnover. What does a company spend to compensate for low retention rates? According to a study by the Society for Human Resource Management, employers will need to spend the equivalent of 6-9 months of an employee’s salary in order to find and train their replacement. For an employee earning a salary of $60K it will cost the company $30K to $45K to hire and train a replacement.

Other research shows that the average costs may be even higher. In a study conducted by the Center for America Progress, losing an employee can cost anywhere from 16% of their pay for hourly, unsalaried employees, to 213% of the salary for a highly trained position. If a highly trained manager or executive is earning $150K, the true cost of losing that employee could be up to $319K for the company!

Why does losing an employee cost so much?

In a recent 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 costs of hiring a new employee – including advertising, interviewing, screening, and hiring.
• Costs of onboarding a new person – including training and management time.
• Lost productivity – it may take a new hire 1-2 years to reach the productivity of an existing employee.
• Lost morale and engagement – other employees who see high turnover tend to disengage and lose productivity.
• Customer service and errors – new employees take longer and are often less adept at solving problems.
• Training costs – over 2-3 years a business typically invests 10-20% or more of an employee’s salary in training.
• Cultural impact – whenever someone leaves others wonder why.

How can you keep strong employees engaged?

There are many costs associated with high turnover, but fortunately there are ways to prevent it. Providing employees with training so that they learn effective productivity strategies is a cost efficient way to help employees thrive and make a significant contribution to the company’s success. When employees are productive and engaged they experience less stress, increased satisfaction and better results, which leads to increased commitment and retention. That is good for business and the bottom line. A small investment in training can bring significant savings by reducing turnover.

To ensure that your employees are well prepared to be highly productive and engaged, contact us to learn more about our productivity consulting and training programs.