Are you constantly losing employees and hiring new ones? Many companies suffer from high rates of employee turnover. According to the Bureau of Labor Statistics, in 2021, an average of 4.4 percent of employees left their jobs each month. The process of losing and getting new employees costs companies a lot of money, and you should invest in employee retention programs. There are lots of expenses that you will have to face if you keep hiring new replacement workers. Here are some ways you are losing money to turnover.
Loss of Revenue
High turnover has a direct impact on your company’s revenue and profitability. For instance, according to the Organization Science magazine, the average cost of losing an employee who earns $8 per hour at a retail store ranges from $3,500 to $25,000. There are several aspects that contribute to these costs, including lost sales, hiring expenses, training labor, and productivity. The revenue impact can be higher depending on your industry, the lost worker’s position, and their wage. If you are providing a severance package, the cost will be even higher because this is an expense that doesn’t have a return on investment. To avoid losing money this way, you should consider investing in employee retention programs.
Low Workplace Morale
When employees keep leaving your company, other employees are affected. This can cause others to work harder and for longer as they are trying to cover up for employees who would have left their jobs. Even if you replace the lost employees, their replacements will not be as effective as those who have been on the job for a while. It will take time for them to familiarize themselves with your processes and systems. Unfortunately, even the new employees are not immune. They, too, will end up suffering from low morale if they struggle to learn new duties. As you can imagine, such a team will not be as productive as it should be, which means you will not make money as fast as you should.
Deteriorating Product or Service Quality
A lower number of experienced employees can lead to lower productivity and quality of work. This will directly impact your product and service quality. If your customers are not happy with your products and services, then your revenue will decrease. This can be a problem in industries where repetition and comfort level play larger roles than innovation. For instance, if you constantly change your hotel staff, the new members will not be able to provide top-tier customer service, as they will be unfamiliar with the hotel’s policies. This will lead to poor customer satisfaction, bad reviews, and over time, your income will start to suffer.
Crippling Direct Employee Costs
Interviewing and hiring replacement employees can have a significant cost. Unfortunately, hiring a new employee will not guarantee that they will stay in your organization, either. In fact, according to Willis Tower Watson, 33% of your hires will leave the company within two years. This means you will keep losing money if you do not find ways to make your employees stay.
Why is replacement hiring so expensive? There are several direct hiring costs that you will encounter when you are getting a new employee. For instance, you will need to pay recruiters or advertise. Recruiters are known to request a percentage of an employee’s first-year salary. You will also have to part with money to cover interviewing expenses. This includes travel and the time that you will spend interviewing the candidates. There are also post-interview costs involved, like checking references and pre-employment tests, signing bonuses, and relocation expenses. All of this is before the onboarding and training costs.
It is important to find ways to encourage workers to stay in your organization. If you keep changing employees, your revenue will suffer greatly. Contact us today if you are interested in employee retention programs.