Every company faces employee turnover at one point or another. But you might not recognize how much it costs your company every time an employee leaves. Between offboarding, filling the gap, hiring a replacement, and training them, you could be facing tens of thousands of dollars in employee turnover costs. And high costs in turnover mean fewer funds to help your business grow.
According to one study from Employee Benefit News, it costs 33% of an employee’s salary to hire their replacement. So, if an employee makes $45,000 per year, your company could face $15,000 or more in employee turnover costs. That’s money many businesses can’t afford to throw away.
Explore these four different areas associated with employee turnover, and learn how each one costs your company money.
When someone at your company leaves, there are a number of offboarding expenses that you may not recognize. For example, the employee leaving will likely need to schedule meetings with different team members to wrap up projects or provide updates on clients. These meetings impact daily work and productivity, for both the employee leaving and those they’re meeting with.
Offboarding also requires a time investment from your human resources department, as well. They have to draw up paperwork, conduct an exit interview, and prepare a job description if another hire is to be made. All of the hours required to offboard an employee and for that employee to prepare for departure is lost time. And, lost time means lost money.
Filling the Gap
When someone leaves a critical role at your company, you will probably need someone to “fill the gap” until a replacement can be found. This might be another team member or the employee’s former manager who is familiar with the job role.
Filling the gap only adds to the stress of the situation. It can put a stain on team members and lower organization morale. If you’re the one filling the role, you’re unable to focus on your own job responsibilities, causing your performance to suffer.
In some cases, if a highly skilled or specific position in your company is vacant, like a bookkeeper, you might not even have someone who is qualified to fill the gap. Unfortunately, since business must go on, you must either do your best to take on the job responsibilities or hire someone fast.
Hiring a replacement for a vacant job role requires a huge investment of time and resources. You need to advertise the role, sort through candidates, interview multiple potential hires, and more. And this long, potentially expensive process might not even solve your problems. You might choose the wrong candidate and when they don’t work out, you’re back to the drawing board.
There’s another aspect of hiring that contributes to the cost of employee turnover — potentially shelling out a higher salary to fill the vacant role. New candidates may ask for more money than your last employee, or even if you’re hiring internally, the employee may ask for a raise.
Your new candidate has been hired. You’re done with the cost of employee turnover, right? Wrong. According to Deloitte, the onboarding process alone costs your business upward of $4,000 per hire. The resources spent onboarding new employees can amount to big costs for your company. Filling out paperwork, investing administrative time, training the new employee, and supplying them with new equipment are all very costly for employers.
Also, keep in mind that when you hire someone, they’re not immediately prepared to do their job. It could take weeks or even months before they’re working at 100% capacity. This ramp-up time will diminish your productivity until the new employee has a full understanding of their position and responsibilities.
While employee turnover is unavoidable, there are ways you can minimize the costs associated with it. When it comes to certain jobs — like your back office bookkeeping, payroll, HR positions, and others — working with a third-party company eliminates the time and costs associated with employee turnover.
Partnering with a provider to outsource some of these crucial roles comes with a number of benefits. You’ll work with a company that has your back and knows your business. Plus, you don’t need to worry about a lapse in productivity when someone leaves. Even if an employee that works for your partner company turns in their notice, your partner is responsible for keeping things moving, making it the ideal option for companies that can’t afford to have crucial roles empty for long.
When you consider outsourcing some of your positions to an expert partner like Keeping Your Balance, you can avoid the risks and costs of high employee turnover. This will greatly improve your productivity and your bottom line.