The Cost of High Turnover

While most managers will attest that keeping an employee is cheaper than hiring a new one, many may not fully understand the true cost of high turnover. There are the obvious costs, including recruitment and training, but there are also hidden costs associated with a metaphorical revolving door of workers. Recruitment and training costs are clear as a price tag can be placed on them, from wages for managers posting jobs and conducting interviews to wages for trainers. These prices can often be in the thousands of dollars.

However, the quiet costs associated with turnover are no less impactful to the company. These include the loss of knowledge of fully trained and experienced employees and low morale for the employees that remain. In a vicious cycle, low morale is a leading cause of increased turnover. Thus, as turnover is allowed to persist, it breeds increased turnover.

The Hidden Costs of Turnover

1. Loss of Productivity: It can take a new employee up to 1-2 years to reach the productivity level of an existing employee.
2. Impact on Employee Morale: High turnover can lead to decreased morale among remaining employees, which in turn can lead to lower productivity and engagement.
3. Loss of Institutional Knowledge: Experienced employees carry valuable knowledge and skills that are not easily replaced.
4. Client Relationships: For roles that involve client interaction, turnover can disrupt these relationships and impact customer satisfaction and loyalty.

Strategies to Improve Employee Retention

Luckily, there are many things that companies can do to improve their employee retention. The highest value factor for employee retention is often compensation, including good benefits. In a previous article, we discussed offering healthcare benefits to employees for lower costs to the company. To learn more, read our article titled “Offering Benefits without Breaking the Bank”.

Additional Statistics

• Cost of Turnover: According to the Society for Human Resource Management (SHRM), the cost to replace an employee can range from six to nine months' salary on average.
• Employee Engagement: A Gallup report found that highly engaged teams show 21% greater profitability.
• Retention and Benefits: A survey by Glassdoor revealed that 57% of job seekers list benefits and perks among their top considerations before accepting a job.

Conclusion

Understanding and addressing the true costs of high turnover is crucial for any business aiming to maintain a stable and productive workforce. By investing in employee retention strategies, particularly in providing competitive compensation and benefits, companies can reduce turnover and enhance overall organizational performance.

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