Employee turnover is unavoidable. It is a fact of business life as are its associated costs. Or is it?

The costs of employee turnover can be staggering, ranging anywhere from 1/2 to 5 times an employee's annual wages dependant upon his or her position. It is neither possible, nor desirable to completely eliminate turnover from your organization. Some of the costs associated with employee turnover are unavoidable and must be expected to occur in the normal course of business. But not all the costs!

You can do something about the high cost of employee turnover...

Before you can start to combat the costs of employee turnover, you must be aware of what these cost are and what they entail. There are, of course, some obvious costs that come quickly to mind, but there are also numerous other costs that you may have never considered that can have a serious impact on your bottom line.

The Hard Costs:
Turning over one employee can cost around 1/2 of a low skilled hourly workers annual wages plus benefits, while losing a member of C-Level upper management can cost 3 to 5 times his or her annual wages and benefits.

Consider this: if your firm has a turnover rate of 25% (about the national average) and employs 40 employees each earning $25,000 annually, your costs of turning over 10 of these employees over the course of a year will be at least $125,000! What could you do with an additional $100,000+ in resources?

Severance pay can also be a huge part of employee turnover costs. This is especially true with highly skilled employees and high-level management. These are wages on which you will never see any return on you investment!

The costs of recruitment: Each time an employee is lost the hiring and selection cycle must start again. These costs can be significant: advertising costs to announce your job opening to the masses, cost of recruitment agencies, background checks, reference checks, drug testing, cost of overtime pay, temporary help and much more.

Hiring costs: Once you've made a hiring decision, the costs of turnover don't stop, but rather continue. Sign on bonuses, relocation costs, and any increases in salary level necessary to attract new talent all add up quickly. The time spent by HR managers to orientate and train the new employee can also be costly and unnecessary. These are all tangible costs that could be avoided with a better employee retention strategy.
 

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