Employees are your company’s greatest assets. Their ability to innovate is what determines your long-term success. For this reason, you need to think critically about how to increase employee retention. Knowing how to measure the impact of employee turnover will help you take action to reduce it. Follow these guidelines to determine how much employee turnover is costing your company.
Factors Affecting the Cost of Turnover
Calculating the cost of losing an employee depends on multiple factors. For instance, advertising, interviewing, screening and hiring cost both time and money. Training, management time and other onboarding activities add up quickly. Lost productivity means it may take a new employee up to two years to reach the productivity of an existing employee. Lost engagement often results when other staff see high turnover and disengage. Customer service may suffer, and errors may increase when new employees take longer to solve problems. Company culture often weakens when staff wonders why someone left.
How to Calculate Your Cost of Turnover
Your cost of employee turnover is equal to the number of regrettable departures times the average cost of those departures. The number of regrettable departures is equal to your number of employees’ times your annual turnover percentage. To calculate your cost of turnover, focus on costs related to hiring, onboarding and training, learning and development and time with an unfilled role. In equation form, (hiring + onboarding + development + unfilled time) x (number of employees x annual turnover percentage) = annual cost of turnover. For instance, say you have 150 employees with 11% annual turnover. You spend $25k to hire each employee, $10k on each employee for turnover and development, and lose an average of $50k on productivity when refilling a role. Your annual cost of turnover would be approximately $1.57 million (25,000 + 10,000 + 10,000 + 50,000) x (150 x 11) = $156,750,000.
Best Practices for Employee Retention
Implement best practices to increase employee retention. For instance, benchmark your employee retention rate so you can determine what’s normal for your business and whether your current rate is high or low. If your rate is high, figure out why and what you can do to lower it. Find out what does and doesn’t work to create proven retention strategies for the future. Create a culture that emphasizes employee feedback so you know whether they are truly happy or want to see specific changes. Conduct exit interviews to determine why employees leave and how you can improve in those areas. Provide opportunities for growth that align with your employees’ career goals. Make sure employee values and beliefs align with the company’s so employees want to carry out the company mission. Regularly praise employees through words, bonuses, pay increases and promotions.
Reduce Turnover Costs
Reduce your turnover costs by partnering with Barracuda Staffing. We provide full service hiring solutions that save time and money and send over top candidates who want to work for you long-term. Get in touch with us today!