Cost of Employee Turnover
By Diane Crosby
Employee turnover is like death and taxes . . .
it is inevitable.
Yes, sometimes it’s for the best when certain employees go on to different jobs or simply quit. Most of the time, though, the loss of an employee takes a toll on your business, even if it is a temporary one.
In reality, there are both actual and figurative costs whenever an employee leaves. How long the employee has been with you has an effect on how deep the cost goes.
It is estimated that a third of employee turnover occurs within the first six months of employment. While it may be frustrating to lose recent hires, the costs of losing them are minimal. Advertising for the position again, time spent training and store-related clothing (polos, uniforms) are a few.
The U.S. Labor Department estimates most people will hold a dozen different jobs in their lifetimes, with an average stay of employment in the four-to-five-year range. Younger workers move along even more quickly.
What does this mean for you? You will likely hire and rehire for the same positions over and over, and an employee who stays around more than four years is a treasure.
When a long-time employee does leave, the costs are great. Losing that person who is proficient in the ways of your store and knowledgeable in the history of decisions (good and bad) is a hard hit. Some of the actual, more obvious costs of losing a long-time employee begin immediately. The bank of information your staff member had is lost. Something as simple as where forms are kept or how to handle returns must be taught to an incoming worker. The more complicated responsibilities the departing person held must fall to someone else.
The employee with special skills (such as embroidery or vinyl cutting) takes those talents with them. If you paid to teach them, your investment walks out of the door. Many employees also have a special rapport with some of your customers. You must now transfer those customers to someone else they can work with. Years of experience cannot be trained into a new employee.
You may think that hiring someone with retail experience would make training easier. That is not always the case. No two store systems are exactly alike. It can be more difficult to retrain someone who thinks he or she knows how to do the job than to start from scratch! Whether experienced or novice, your new staff member will need lots of instruction in the particulars of your store, your specific methods and your policies.
When you do hire someone new, there are lots of little costs that are incurred. In addition to time and effort for training, a new employee may need certain supplies or equipment to organize the job his or her way. Each person is different.
However, one of the biggest price tags of employee turnover would be costly mistakes. Everyone makes plenty of small errors, but there can be large miscalculations which cost you big bucks. New employees are more likely to make those types of mistakes. Errors, properly handled, can be considered as workshops for improvement. Hopefully, though, they are not so catastrophic as to compromise your business’s bottom line.
As other staff members take on the duties of the job vacancy, their usual tasks suffer. This temporary gear shift will only correct itself when you have a new employee fully trained. Someone has to do that training, which also keeps the trainer from his or her regular work. Being short staffed also means fewer people to rotate and cover for those on vacation or sick leave. Special projects are put on the back burner. If you ever lose the person in whose hands you can leave the store, it is devastating.
Another hidden cost of losing a good employee is the loss of camaraderie. Friends are often made at work, so a departing employee may mean a departing friend.
On the other hand, there can be some cost advantages to certain employee turnover. If an employee leaves after months of indifference, a fresh face may boost morale and sales. If there was an issue with bad work habits (for instance, too much time on the cell phone), it is now resolved. Most of the time, a new employee will make less money than the exiting one. On paper, that is a savings in the short run, but there is a reason for the apparent savings. A new employee costs your staff time (therefore dollars) and slows down the store’s operation.
Truth be told, some employees’ departures are helpful. If they had poor attitudes, were prone to stir trouble or may even have taken products or money, it is more profitable for them to leave. Be sure to get any keys and change security codes and perhaps credit cards if you suspect trouble ahead.
Unemployment claims can be another cost if the employee was let go by the company. While unemployment benefits are paid from your account, your rate can go up as a result of extensive claims. Claims cannot always be avoided, but do keep records of employee issues, reprimands and actions taken. Such records may help.
Keeping good employees is not all about the cost. Sometimes the offer of more money or a different schedule may help retain a staff member, but not always. Do what you can to prevent the loss of good employees, but realize it may be out of your hands. Keep the transition amiable. There’s no need for drama. You may find your former employee makes a good fill-in from time to time. Look to the future and begin the training process again!