![]() ![]() The cost to replace a minimum wage employee is about $3,700.Ī vacated or unfilled job within an organization results in tangible, measurable costs as well as intangible costs. On average, it costs a company about one-third of a new hire's annual salary to replace an employee. Vacancy costs account for increased overtime or temporary employee costs incurred while the position is unfilled.Įmployee turnover costs can significantly affect the financial performance of an organization. Replacement costs account for attracting applicants, interviews, testing, and moving expenses. Separation costs account for exit interviews, termination administration, severance pay, and unemployment compensation. There are three cost categories associated with employee turnover. ![]() Employees believe they have a voice and are recognized for their contribution. Employees are given opportunities for advancement and are not micro-managed. Employee oriented organizations solicit input and involvement from all employees and maintain a true "open-door" policy. Many studies show that companies with low turnover rates are very employee oriented. Turnover rates average about 16% per year for all companies, but 21% per year for IT companies.54 Computer companies average higher turnover because their employees have many opportunities to change jobs in a “hot” industry. Lengthy training times, interrupted schedules, additional overtime, mistakes, and not having knowledgeable employees in place are some of the frustrations associated with excessive turnover. But cost is not the only reason turnover is important. One firm had a turnover rate of more than 120% per year! It cost the company $1.5 million a year in lost productivity, increased training time, increased employee selection time, lost work efficiency, and other indirect costs. Excessive turnover can be a very costly problem, one with a major impact on productivity. High turnover may be harmful to a company's productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workers. If an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry. Simple way to describe it are "how long employees tend to stay" or "the rate of traffic through the revolving door." Turnover is measured for individual companies and for their industry as a whole. In a human resources context, turnover or labour turnover is the rate at which an employer gains and loses employees. ![]()
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