Replacing an employee is a stressful, expensive experience for any employer. Replacing even the most inexpensive, unskilled and uneducated employee usually costs around 15% of an employee’s annual salary. Replacing an employee in a high-paying job, often requiring a specific skill set and making in excess of $75,000 a year, is more expensive, usually costing in excess of one fifth of the employee’s annual salary. If this seems high, here are some common expenses that are involved in normal employee turnover.
Although the exact amount changes depending on the type of departure and the specifics of each circumstance, a departing employee will almost always incur direct costs. Exit interviews must be conducted, and you’ll often have to dole out for severance pay, continuing medical coverage, and unemployment costs.
While you’re searching for a permanent replacement employee, you’ll have to somehow pick up as much of the slack left by the departure as possible. Temporary staffing is a common solution, but temporary employees and their agencies need to be paid, and the new employees will require time to become familiar with your business.
When you decide to hire your new permanent employee, they don’t just magically appear at their desk. You’ll have to pay to advertise the position, pay for any background checks, physical examinations and/or drug tests, and cover the various costs associated with interviewing candidates.
Even when you’ve decided which lucky aspirant will be joining your company, you’re not done paying out. You have the costs associated with bringing the new employee on board – hiring bonuses, relocation costs – and the costs associated with getting them started in their new position – orientation, training, certification, required uniforms, and organizational literature.
Finally, no matter how quickly and adequately you replace an employee, it will always cause some level of disruption. As your remaining employees shift their responsibilities, and as you train new temporary and permanent employees, you will lose productivity, with growing pains in the form of reduced quality and speed, and unavoidable errors simply due to working in an unfamiliar system.
Employee turnover can be expensive, in terms of both direct and indirect costs. Working closely with a staffing expert can limit the productivity downtime and the costs incurred by employee turnover. Ask us today how we can help your business with staffing solutions!