The High Cost of Employee Turnover in Business

High employee turnover, where workers frequently leave and must be replaced, leads to increased spending on recruitment and training and can indicate management problems. Employees often have good reasons for moving on but if too many are leaving an organisation, can be very disruptive.

When an employee leaves the company of his or her own volition, it is called voluntary turnover. In this essay, I will discuss why voluntary turnover is a problem for many organisations and how to retain employees.

High employee turnover has monetary costs. Though estimates vary, most experts agree that turnover costs, when all things are considered, equals at least 25% of a leaving employee’s annual wages (Silva & Toledo, 2009). For example, for an employee making $25,000 per year, the total turnover costs associated with replacing that employee would be at least $6,250. This includes cost of prescreening measures such as drug tests, background checks, application reviews, interviews, pre-employment training and other recruitment costs (Dolfin, 2006). It also includes implicit cost associated with on the job training and the productivity loss experienced by other employees that must help acclimate new employees to their environment

Having a high employee turnover rate can cost the company more than just people. There are many “costs” physical and opportunity that are included into high employee turnover. The physical costs of high employee turnover is training the new employee, interview expenses, and advertising costs. These are general costs, but when

The end result of a lack of employee motivation in their jobs is turnover. When one is not happy with their career or job choice and it becomes clear that an employer is only looking out for the profit line of the corporation, employees will actively seek out new employment opportunities. The cost of turnover to an organization is tens of thousands of dollars now vying to be spent on interviewing, selecting, and training a replacement.

Nevertheless, these methods cannot predict employees’ turnover. Morrell et al. (2001) discuss about two key concepts: voluntary and involuntary turnover. Voluntary turnover relates to the employee’s decision to leave such as illness or personal reasons. While, involuntary turnover relates to company related problems such as the need to cut costs or to downsize. Even if organisations develop means to identify the characteristics that influence turnover, neither of these two types can be successfully foreseen during the recruitment process. As a result, employers need to secure long term employment since a labour turnover will have a high cost both in terms of recruitment and selection and in terms of training sessions meant to enhance the employees’ soft skills. (Beardwell and Claydon, 2010).

It is difficult to fully calculate the cost of turnover; however, industry experts often quote 25% of the average employee salary as a conservative estimate (Nobscot Corporation, 2016). The direct costs of employee turnover include advertising, recruiting, hiring and training costs. Although there is a significant financial impact to an organization the cost is based only on replacing an individual employee. Turnover can also have indirect costs, such as workplace productivity loss, workflow efficiency and the loss of organizational knowledge. When an employee leaves, they take with them valuable knowledge about the organization, the customers, the current projects and past history, sometimes taking this information to competitors (Nobscot Corporation, 2016). Not retaining the adequate numbers of employees could also lead to over-burdening employees, low employee morale, poor customer service, and more safety concerns (Jones & Gates,

For my research assignment I chose the topic “The Effects of Human Resource Management Practices on Employee Turnover.” I chose this topic because it is allied with an assignment

A company that has 500 or more employment turnovers has a very huge problem. This issue needs to be addressed for the company to be a huge success in today’s society. Evidently, the employees are not happy with the way the bank is being ran within the company. Happy employees molds, a company into a long term success. There are several ways I would attempt to correct the huge employment turnover. The ways I would attempt to slow down the turnovers are to interview the present employees who have been there for more than two or more years, question, management to see if their doing what it takes to maintain employees, talk to corporate to see what type of incentives are being offered and participate in a job fair to meet and greet the potential

In any organization high employee turnover is not cost effective and is time consuming. The credibility of the organization might also be affected if employees do not stay for a good period of time working for them. A good reason employees may resign is being motivated by higher pay. No matter how much someone enjoys working for that organization if better pay is offered somewhere else they will more likely will end up leaving. Every organization must maintain salary competitive by offering comparable pay and benefit packages. In addition to traditional “pay and benefit” compensation, some companies also offer extra perks such as on-site gym, day care, discounts on services or traveling and employee assistance programs. Another reason why employees might resign is that they do not feel engaged. Employees like having job satisfaction, challenges, new duties, recognition, receive positive feedback, new goals and job advancements. If employees feel bored they might leave the organization. High-performing workers need to feel that they are being challenged and are moving forward in terms of professional growth and development. Another reason of turnovers is that employees are poorly managed. A bad boss can make employees feel miserable; if their immediate supervisor creates an uncomfortable work environment they may consider leaving. Employees who are well compensated, challenged, engaged and properly managed will likely be

Retail employment makes up a great deal of the younger peoples’ jobs. The jobs require a low amount of skill, but also only give a lower amount of pay. They are usually used as a building point for many as they begin their lives as working professionals. Most often these positions are temporary and the turnover rate is exceptionally high. According to Career Builder, “an analysis of [Bureau Of Labor Statistics] by the National Retail Federation, nearly a quarter of retail workers voluntarily left a job in 2010” (Career Builder, 2011). Although retail workers do not make up the entire United States work force, a quarter of any population is a huge number to be affected. I have held

mployee turnover has long been a concern of the hospitality industry, and therefore of researchers who examine industry human-resources concerns. One stream of research that arose in the past 20 years was an effort to quantify the cost of employee turnover. Although most managers agreed that turnover was bothersome, calculating a dollar figure for employee departures would provide those Timothy R. Hinkin, Ph.D., is a professorof managementorganization, human resources, and law (MOHRL) and director for undergraduate

Whether it be evidenced through expenditures in agency or search firms, lowered productivity or morale, high turnover costs your company. In fact, each time one of your employees walks out your door for the last time, it can cost your company anywhere from $25,000 for entry level positions, up to $250,000 for a senior level positions.

An organization’s turnover is measured as a percentage rate, which is referred to as its turnover rate. Turnover rate is the percentage of employees in a workforce that leave during a certain period of time. Organizations and industries as a whole measure their turnover rate during a fiscal or calendar year. If an employer is said to have a high turnover rate relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry. High turnover may be harmful to a company 's productivity if skilled workers are often leaving and the worker population contains a high percentage of novices. Companies will often track turnover internally across departments, divisions, or other demographic groups, such as turnover of women versus men. Most companies allow managers to terminate employees at any time, for any reason, or for no reason at all, even if the employee is in good standing. Additionally, companies track voluntary turnover more accurately by presenting parting employees with surveys, thus identifying specific reasons as to why they may be choosing to resign. Many organizations have discovered that turnover is reduced significantly when issues affecting employees are addressed immediately and professionally. Companies try to reduce employee turnover rates by offering benefits such as paid sick days, paid holidays and flexible schedules.

Employee retention has always been an important focus for human resource managers. Once a company has invested time and money to recruit and train a good employee, it is in their own best interest to retain that employee, to further develop and motivate him so that he continues to provide value to the organization. But, employers must also recognize and tend to what is in the best interest of their employees, if they intend to keep them. When a company overlooks the needs of its employees and focuses only on the needs of the organization, turnover often results. Excessive turnover in an organization is a prime indicator that something is not right in the employee environment. We will look at