Why is it so expensive to keep hiring?
The Numbers
Some findings by recent studies show that in general, replacing a worker will involve around 20% of that person’s annual salary — this is most true for workers earning less than $50,000 a year, which is the majority of all U.S. workers. These numbers were slightly lower for the under $30,000 category, and slightly higher for high skilled positions like executives or doctors.
Cost Components of Turnover
- Productivity loss. It can take months to build back up to the levels that the previous skilled and experienced worker had attained. No matter what the task is, productivity loss is a major factor across the board.
- Additional training. In almost all cases, the cost of employee turnover will require significant learning curve that employers have to handle. Many start out with investing in orientation and continue to invest in specific training for new hires, building up to the level of talent and productivity of those who they replaced.
- Administrative costs. You’ll have to figure out that person’s payroll information, maintaining their benefits and more. Meanwhile, the company still has to do some kind of paperwork for the departed employee as well. You can see this kinds of costs add up, either in an in-house accounting department, or when vendors charge more for additional services.
All of these are reasons why companies invest in retention and try to prevent the cost of employee turnover. The smartest companies use a variety of tools and resources to do this. Helpful orientations set the stage for success. They build relationships with individual employees that are respectful and provide incentives to stay on at a company. And when someone does leave, exit interviews and other processes help to provide business intelligence, to limit turnover in the future.
For more about hiring and employee turnover, check out this blog post: Reducing Employee Turnover- Hiring With Purpose
Have a question? We’re happy to help.
