5 Important Costs of Employee Turnover

Posted by Susan Cullen on January 10, 2019


5 Important Costs of Employee Turnover - NexaLearningMany businesses struggle with employees who move in and out of the company on a regular basis. Some employees naturally move on to positions with other companies; others discover that they aren't a good fit for your business. In many cases, employees choose to leave because they feel unappreciated in their current position or because they are struggling to get the training they need within your company. If you're struggling with high levels of employee turnover, have you considered the true cost? Consider these costs associated with employee turnover. 

1. Replacement Costs

Most of the time, when an employee leaves your organization, you have to replace them. It's estimated that it will cost approximately 16% of an employee's annual salary to move a new employee into that position. When you're replacing low-level employees, that might not be particularly substantial, but replacing managers and other high-level employees can quickly become an expensive proposition. Replacement costs include advertising, time spent sifting through resumes, and the time spent in interviews. Do you interview with several members of a team, rather than just one employee? If so, you may find your replacement costs increasing as your employees must take paid time out from their normal job tasks to deal with the task of finding a new employee for their team. 

2. The Cost of Training

When you replace an employee, you don't just have to find a new person to take over an open position. You also have to train them to take on that position. In many cases, especially in highly skilled positions, that can be a daunting task: in many industries, there's a talent shortage that makes it incredibly difficult to find employees with the necessary skills to fit a given position. As a result, many companies hire employees with the right aptitudes, rather than the right specific skills--and that means that they have to be trained to fit those positions. Training costs include:

  • The cost of training materials
  • Paying the employee while they are training
  • Paying other employees while they offer advice and information to the employee who is in training

The more complex the process that an employee will be expected to complete each day, the more expensive training becomes. 

3. The Cost of Experience

When an employee leaves your company, they take their experience with them. Is there a specific employee that everyone goes to when there's a tech problem? An employee who has been working with a specific client, providing them with exactly the advice they need for their specific company needs? When that employee leaves your company, they take that considerable experience with them, leaving you floundering to find an employee with similar skills and knowledge to fill the position. In many cases, it can be impossible to replace a specific employee's experience. No matter how precisely you word your job description, you may not be able to find a candidate with the right skill set and personality, especially if you aren't offering the salary, benefits, and training opportunities that employee is hoping for. 

4. Decreased Morale

Do you have high levels of turnover within your company? If so, it isn't just impacting your bottom line. It could also be substantially impacting employee morale. High levels of turnover means that the company culture is constantly changing and adapting. It can be difficult for employees to find a "normal" for the way things go at work every day. Does your high turnover extend to management? Employees at lower levels of your organization may find themselves constantly needing to adapt to new processes, rules, and methods for handling specific types of issues. This quickly causes confusion and frustration. Not only that, no one new manager--and their accompanying management style--is going to suit every employee, which means that you're going to have disgruntled employees whenever management changes. As a result, you may find that it's more difficult to keep employees at all levels of your organization. Decreased morale can also lead to:

  • Poor employee motivation
  • More sick days
  • Less productivity overall
  • Employees who struggle to work with one another

When you have a cohesive team that sticks with your organization long-term, you'll find that they're more likely to support each other, and that each member of the team knows exactly how they're supposed to function. Increased morale also increases productivity and leads to more efficiency throughout the business as a whole.

5. Problems with Customer Satisfaction

Customer satisfaction is at the center of your business. Satisfied customers return to your company to do business when they have future needs that you can meet, while dissatisfied customers may turn to your competitors to see if they offer the "more" that they're no longer able to get from your business. When you have high levels of employee turnover, however, you may struggle to keep customer satisfaction levels high. Consider:

  • New employees may not know customer service policies. They may provide different service than your customers are used to, or they may fail to follow the script that customers have come to expect.
  • Customers may deal primarily with a specific contact or salesperson within your company. If that person is no longer employed with you, they may take their customers with them--or customers may simply be frustrated by the changes in personnel. 
  • New employees may take longer to complete simple tasks for customers, leading to higher overall levels of customer frustration. 

The true cost of employee turnover can be staggering, which means that retaining employees throughout your organization is critical to keeping your company running smoothly and reducing the overall costs of operation. One of the primary tools at your disposal is adequate employee training, which helps keep employees within your company instead of moving on to a competitor. From leadership training that offers new opportunities for employees at many different levels of your company to more specific types of training based on your employees' needs, we're here to help. Contact us today to learn more about how we can help with employee retention as we provide your employees with the training they need. 

Download a copy of our whitepaper "Techniques for Retaining and Engaging Your Workforce". If your organization is aware of the tremendous cost associated with turnover, and you realize you are losing some of your best people, it is important to assess the symptoms and address methods for enhancing employee retention.

Download Whitepaper


Topics: Employee Development


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