A high turnover rate costs more than a few paperclips from the supply room.
High turnover means that a significantly high number of employees are leaving the company. This is costly to a company because it creates openings that must be recruited for and filled, and the new hires must be trained. A high turnover rate has an overall negative impact on both the company and its remaining employees.
Cost
The cost of high employee turnover varies, depending on the salary and job duties that must be replaced. For example, a job that takes little training, such as a dishwasher in a restaurant, costs the company less than replacing the restaurant manager. A general rule of thumb is it takes the annual salary to replace a worker. If an exiting employee made $45,000 a year, the company can anticipate a $45,000 cost in recruiting, hiring and training his replacement. The more essential the employee is, the more the cost goes up. A company executive, for example, could cost the business two to three times his salary to be replaced.
Causes
Employees leave for many reasons, but several primary reasons top the list. Many employees leave for higher paying positions. Employees also leave when they feel the company is not stable. The organizational structure and method of communication with employees is important to workers. If they believe the company is shaky or shady, they start to migrate in large numbers.
High turnover is sometimes attributable to the industry. Few people become waitresses or dishwashers because it is their career goal. Such positions are simply jobs to be used as a means to an end, therefore, company loyalty does not become part of the overall package. Waitress jobs are a dime a dozen in most cases, meaning employees can leave any time they decide to without much worry. Employees who job-hop are also an underlying cause for high turnover rates. It is important to screen applicants to be sure they haven't had a long list of job changes without valid reason, otherwise they may be leaving your business within months after you have invested in their hiring, training and benefits package.
Finally, employees leave for more challenging positions. If they feel their work is unappreciated, if the duties constantly remain the same with no room for advancement or if the duties are physically demanding for entire shifts, the workers will seek out new positions.
Reducing High Turnover
No company should expect to retain every employee, but there are steps businesses can take to reduce employee turnover. Paying a fair market wage for labor will help reduce your turnover. Check within the industry to determine the average wage for each position you are offering and pay fair wages to your workers. Providing incentive programs and bonuses for additional efforts can keep workers happy. Communication with workers is key to maintaining your workforce. If they feel they are part of the team and included in the decision making process whenever possible, they will develop company loyalty. Make sure there is room for advancement from within the company. Workers who feel they will never move up, typically search for ways to move out.
Screen Applicants
Checking an applicant's history is important if you want to avoid a high turnover rate. Employees who move from job to job are often dissatisfied with something in their own lives, career choice or circumstances, and nothing you do will get them to stay on at your business. Check references, call the past companies and ask about length of employment rather than relying on what the resume claims and ask questions during the interview process to help avoid this cause of a high turnover rate.
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