I Quit! – The True Cost Of Employee Turnover
It can be frustrating to hear "I quit" from good employees under normal circumstances, let alone in a market seeing historical highs in talent shortages. According to research, one in seven companies report difficulty filling positions, and the future isn't looking much better.
It seems that the initial fear of robots taking over the workforce isn't a 21st-century problem, but having enough humans to fill positions is. Korn Ferry reports that we will see around 85 million unfilled positions by 2030 due to a lack of talent. So, how does high employee turnover impact your business?
Let's start with knowing the top reasons for employee turnover: lack of purpose and appreciation, poor company culture and work/life balance, and burnout. Inadequate benefits, compensation, and bad managers also often contribute to the problem.
When employees continue walking out the door, the true cost of employee turnover won't just be monetary. Here's everything you need to know, including how to reduce employee turnover.
Let's Discuss the Obvious – Employee Turnover Costs You Money
First and foremost, the most significant impact high employee turnover has on a business is sky-high costs. You can expect some of the following expenses for each employee you have to replace.
The actual salary cost varies depending on employee salary. You can expect a manager earning $60,000 to cost your business as much as $30,000 to $45,000. However, you may be looking at an average cost of $1,500 or more each for hourly employees, with technical positions costing 100-150% of the employee's salary and a C-suite job costing nearly 213% of their salary.
To put these numbers a bit more in perspective, Gallup adds that this 'fixable problem' costs organizations with 100 employees (and $50,000 average salaries) anywhere between $660,000 to $2.6 million per year in turnover and replacement costs.
This isn't just due to rehiring costs either — productivity is also down in the meantime. This halt in production actually costs U.S. businesses nearly $1.8 trillion each year.
As if this wasn't troubling enough, there has been a recent surge in resignations in the U.S. since early 2021, called The Great Resignation or Big Quit. In less than a year, as many as 33 million Americans quit their jobs! This is because workers are prioritizing their health (time off, packages, work-life balance), worth (benefits, compensation), and values (purpose, beliefs) over the safety and comfort of a position they're not happy in.
The True Cost of Attrition
Monetary costs are far from the only employee attrition factors companies are experiencing during the Big Quit. This is because turnover affects replacing the employees and these other factors inside the workplace. What's more, there's a bit of a snowball effect here that continues the cycle.
We've already mentioned the impact of a decline in productivity costs businesses in the form of money, but what about the rest of the workers? All employees are affected when employees leave, putting the weight of the day's work on those who stayed. This often causes more people to quit as a result. Research suggests that burnout is the cause, with 39% citing exhaustion and 54% citing they're overworked.
As more people leave, morale goes with it. This is because the loss negatively impacts workplace culture and employees. Employees lose engagement in their work because there's now so much to be done and not enough to do it. There's also the challenge of new employees coming in and having to readjust to the changes.
Now that employees are scrambling to cover for their missing coworkers, efficiency goes out the door as well. Things will easily be overlooked — often even unintentionally, more mistakes are made, and customer service experiences are likely to decline. Considering 17% of consumers will walk away after one bad experience and 59% after several, your company may also be looking at a loss in profits in the process.
Noticing the Signs Before They Say "I Quit!"
Take action before you experience the snowball effect of high employee turnover costs by keeping an eye out for these signs:
- Decreased productivity
- Doing the bare minimum to get by
- Attitude changes at work
- A lack of cooperation
- Stop participating in company gatherings and issues
- Being vague about their future commitments
- Avoiding management
Improving Employee Retention – What Works?
According to research, the following factors are most helpful when improving your employee retention:
- Better training and ongoing training — 94% of workers admit they would stay at their jobs longer if employers cared enough to invest in their training.
- Improved culture — 46% of employees cite company culture as very important when choosing to stay or leave a company.
- Wellness programs — higher job satisfaction is reported among 70% of workers enrolled in a wellness program.
- Better compensation and benefits — 60% of workers consider benefits very important to job satisfaction, and 77% feel underpaid for their position.
Working with a PEO to Reduce Employee Attrition and Increase ROI
Retaining employees is more important than ever before. Not only do you now have a good idea of what the actual cost of employee turnover can do to your business, but businesses are already struggling to replace employees. This means that you could experience even higher costs because that position may remain unfilled for a while, and your existing employees may get too overwhelmed to keep up.
This is where a trusted PEO is important.
PEOs like PRO Resources have been working closely with business owners and their teams to reduce attrition and increase ROI for years by helping companies improve their retention, culture, productivity, and more. Contact us for an inside look into how we can keep your employees happy with their jobs and less likely to leave amid the Big Quit era.