Not only should you worry about revenue decline, but you should also be aware of the true costs of turnover. It doesn’t matter whether you work for a promising startup or one of the Fortune 500 firms; without a strong team behind you, you won’t go very far. Obviously, you want to employ the top people in your profession because you want to work with ambitious, goal-oriented people who will do anything you ask of them. You need to make sure that your employees are invested in working for your company since they are the key to its success.

Improving the hiring process is the first step in lowering employee turnover. This will help bring in top talent that will not only be productive but will also be around for a long time. However, businesses cannot shirk their obligation to contribute to the ongoing enthusiasm of their staff. Even the most committed employees will go elsewhere for job if you don’t take that responsibility seriously.

Most people, when thinking about employee turnover, get obsessed with the dollar amounts linked with those who have left. However, the most alarming consequences are the ones that do not fit within profit margins and should be avoided at all costs. Read on to learn the shocking truth about the expense of staff turnover.

When Employees Leave, What Does That Mean? 

The turnover rate is the percentage of employees that leave their positions within a certain time frame. It’s highly correlated with how long workers decide to remain with your organisation, but the two don’t always line up perfectly. While a high turnover rate is an indicator of deeper issues, it is important to remember that attrition has always been and will continue to be a normal component of any thriving business. So what is the costs of employee turnover there?

About the Turnover

In this context, “turnover” is the number of workers who quit their positions for whatever reason. In contrast to “involuntary turnover,” which describes an employee’s departure from an organisation as a consequence of being dismissed, “voluntary turnover” describes an employee’s decision to leave the company freely. In a perfect world, you’d only bring on board staff who you’re eager to have around, drastically cutting down on involuntary turnover. Voluntary turnover, on the other hand, is harder to control and might have unintended consequences that hurt a firm. It’s more probable that this type of change will occur.

The Bureau of Labour Statistics performed a study in 2021 finding that, across all industries, the average annual turnover rate is 57%. This figure accounts for both voluntary and involuntary turnover. The real turnover rate, however, may vary considerably from one industry to another. Based on data collected in 2019, the technology industry was determined to have the fourth highest turnover rate behind the retail, manufacturing, and consumer goods sectors. This creates a dangerous situation for IT firms.

The True Cost of Turnover

The cost of replacing an employee is estimated to be between 150% and 200% of the salary of the position. The expense of replacing departing workers is high. Each employee’s share of the financial burden is proportional to his or her seniority. If you pay them by the hour, it will cost you about $1,500 per worker. For those working in technical fields, the price rises to between 100% and 150% of base salary. It has been estimated that it might cost up to 213% of a C-suite executive’s yearly salary to replace them.