Employee turnover is something that every business has to deal with. If you think that losing an employee is “just that,” however, then you might want to rethink your stance because the true costs of replacing even one person could be much more than you realize.
Those costs become even steeper if your employee exits under less-than-favorable conditions, say the experts at the Law Offices of Jeremy Pasternak, so it’s in your best interests to understand how employee turnover can affect your business so you can mitigate the potential downsides and hold on to your most important resource—people.
How Much Money Does Turnover Cost?
Imagine you have a “superstar” employee at the office. They’re competent, they’re efficient, and one day, they suddenly depart for greener pastures. Your business will certainly feel the void left behind, as productivity may fall and you’ll need to spend resources on a replacement.
Here’s the thing, though—it’s not just the voluntary departure of stellar employees that costs businesses. You will incur an expense for every instance of employee turnover. Currently the cost of replacing any individual employee ranges from one-half to two times that employee’s annual salary. Across the US, the turnover rate is roughly 30%, so this issue costs businesses close to $1 trillion every year. In a competitive job market, losing people can be quite costly.
Turnover Affects More Than Just Money
The time and money spent on replacing an employee are just the tip of the iceberg. Voluntary turnover is going to cost you more than an initial hit to the pocketbook:
- Turnover lowers morale — When one employee goes all the others feel it, and their connection to your organization and goals can get disrupted depending on how close they were to that other employee. If it’s a situation where multiple employees leave, the rumors and rumblings will become pervasive, and you’ll also be dealing with office gossip on top of trying to replace valuable staff.
- Turnover reduces employee productivity — When one team member goes, their responsibilities get shifted to other employees until they are replaced. These other employees already have their own duties, so adding the work of another is going to slow them down and drain their ability to stay productive.
- Turnover kills your reputation — Turnover doesn’t just influence what goes on inside your company. Outside of your organization, people may interpret turnover as a sign that your business is faltering, and it could affect your ability to attract new hires.
As you can see, the costs of losing employees add up, and neglecting them is often a surefire pathway to ruin. Thankfully, though, there are ways to mitigate turnover and keep your employees happier so that your business can save on time, money, and other resources.
Focus On Employee Retention
Because the cost of losing employees is so high, you’ll want to keep the loyal workers you have. Generally speaking, this means paying your employees well and staying engaged so that you can address individual issues as they arise. Remember: the more active and invested you are with your employees, the better you can respond when they have an issue.