No HR team wants to deal with turnover. Your employees are your greatest investment, and when they leave, it can affect the whole team’s ability to function smoothly. Employee turnover can have serious impacts on a company in terms of both time and money—so every HR manager must learn how to minimize it.
Turnover cost in time and money
The cost of turnover varies by an employee’s job level and amount of expertise. In general however, employee exits cost about 1/3 of their yearly salary. For senior-level positions, one estimate says a departure can cost 200% of the employee’s salary.
Furthermore, even higher costs can result when a company replaces a lost employee with a bad hire — someone who is a poor fit for the role. Bad hires and turnover combined can cost 30% of a company’s annual profits.
The cost breakdown
Here’s an overview of the expenses that arise from employee turnover.
- 67% of total turnover-related costs go toward soft costs like plummeting productivity, the time it takes to interview new candidates, and lost knowledge.
- 33% goes toward hard costs like recruitment, background and drug screenings, and hiring temporary workers. Recruiting and advertising fees can be quite steep. If the company contracts an outside agency, it might ask for 20–30% of the new hire’s salary for the first year.
- Employee turnover costs companies a fortune in hours spent recruiting and training new staff, too. Onboarding and training costs can consume much of HR’s time. Replacing an employee takes about 8–12 weeks. And after hiring, it takes 1–2 months for the new employee to get up to speed.
How to reduce turnover
Taking the following steps will help you dramatically reduce turnover, saving costs and giving you a committed team that can effectively reach its shared goals.
Building strong relationships between managers and employees.
Coach your managers on how to coach their own employees. Leaders often need training and mentoring in this area to succeed.
Encourage leaders to do all of the following:
- Take accountability for mistakes they make.
- Show they’re always striving to learn.
- Provide frequent feedback and support to their employees.
- Have open discussions in which employees feel safe sharing their concerns.
- Express their appreciation for employees’ hard work.
Fostering trust between employees and the organization.
Be open and transparent with your employees about your company’s plans and seek their input. This will help everyone feel more invested in your company’s initiatives. Nothing pushes employees out the door faster than feeling like they’re in the dark about upcoming changes that will affect them.
Providing opportunities for growth and advancement.
Not having enough career development opportunities is a primary reason why people quit their jobs. In 2018, 22.2% of employees who quit their jobs left for this reason.
- One-on-one coaching: Meeting with your employees each week to discuss their progress toward their goals will give them the support they need to achieve them.
- Outside training: Giving employees fresh perspectives and expert knowledge in the form of seminars, conferences, and workshops will keep morale high. Ask them what they’re most interested in learning about so you can find resources that fit their needs. Even in the time of the pandemic, these resources are available. Look for virtual conferences and webinars that employees can access from anywhere!
- Succession opportunities: Work to promote from within, and let employees know what opportunities may become available for them. That way, they’ll feel excited about advancing with your company rather than feeling they need to look elsewhere to move forward in their career.
Offering special perks.
Providing extra benefits that employees find useful will help them feel more loyal to your company. Employees often appreciate financial wellness programs, like retirement planning assistance. Wellness initiatives that encourage them to stay healthy, like a subscription to online fitness classes, are another great way to show you care and increase loyalty. Incentives like extra vacation time for reaching a certain milestone can also make your company a more enjoyable and rewarding place to work.
Tools that can help boost retention
Using the right tools can help you boost retention. First, you can guide employees’ progress more effectively with the right performance management solutions. Second, you can share detailed feedback with employees that helps them to learn on the job every day and affirms their successes. Third, you can use tools for soliciting employee input to show that you take their opinions seriously and will consider them in your decision-making processes.
Read our ebook for more tips on how to use the best available performance management solutions to improve employee engagement and the entire employee experience. Your employees will become more loyal members of your team as you take all these steps to improve their experience and job satisfaction.