Business planning

How High Turnover Rates Can Cost Your Company

People leave jobs. That is a fact that cannot be denied. They either find better-paying jobs, personal issues arise, or they want a change of career. However, when your company has a high turnover rate, there’s a deeper issue at stake. And it’s one that you will need to examine closely, lest it ruins your business.

Why Employees Leave

There are plenty of reasons that employees cite when then leave a job. Let’s examine some of them more closely.

1. The company culture is toxic.

Company culture is the primary reason more than 40 percent of active job seekers cite as to why they left their former employer. What makes a company culture toxic? There’s a distinct line between rank-and-file employees and the executive level. Management has not made any improvements to either company policies or to the physical state of the workplace. Thus, something as simple as hiring preventative sanitation services to secure employees’ well-being would have made them stay.

2. No room for growth.

No employee would like to remain in their position, doing the same thing over and over, for a prolonged period. Offering opportunities for upskilling, promotions and incentives would give employees the motivation to do better at their job and would typically make them stay. If you don’t have programs in place for employee development, you might find yourself constantly trying to hire new recruits.

3. A lack of empathy from management.

Some employees state this as a one-way form of communication. Meaning, management speaks, employees have to listen. However, empathy is more than just a buzzword. It fosters a productive working relationship between you and your employees. Without it, employees would feel like they are not valued. The more you show that you lack empathy and understanding, the more likely you will have a high turnover rate.

What Does a High Turnover Rate Cost?

professional man and woman

In a phrase, quite a lot. Depending on their position in your company, a high turnover rate could, at the very least, cost you one and a half to two times an employee’s salary. To break that down further:

  • Low-paying jobs (less than $30,000 salary per annum) – The average cost of replacement is said to be 16 percent of their annual salary.
  • Mid-paying jobs (earning between $30,000 to $50,000 per year) – The average cost of replacement is reported at 20 percent what they earn in a year.
  • High-paying jobs (earning above $50,000 a year) – Replacing a C-Suite level executive could cost you 213 percent of their annual salary. To put that into perspective, a CFO earning $100,000 would cost you $213,000 to replace.

If you’re looking at these numbers and thinking it’s not so bad since most of your attrition happens at the low-paying level, imagine what will happen if you have a revolving door of employee turnover; that 16 percent would add up quickly.

The Hidden Costs

While the financial cost already speaks volumes, there are also hidden, intangible costs when employees leave voluntarily.

  • Loss of productivity. When an employee leaves, they leave a position that needs to be filled. If you don’t fill that role immediately, their workload could either go to other employees that are already stretched too thin or their work is delayed. Either way, you are looking at stalled or lost productivity.
  • Loss of employee morale. Seeing a colleague leave would destroy workplace friendships and trust. It leaves a hole in the team’s or department’s dynamic that would be difficult to replace since it takes time for people to gel. This could also lead to more turnovers because if a trusted co-worker leaves, what’s stopping another from doing the same?
  • Loss of employer brand. Not surprisingly, a high turnover rate would also affect how people perceive your brand. You might end up attracting low-quality candidates who are only looking for something temporary. Having people leave might also leave a bad impression with your clients if someone they trust is no longer working in your company.

As a business owner, it is your responsibility to take care of your employees. You would want employees who are loyal to you and share in your passion and commitment to your field. Learn to value and recognize them and you would keep your turnover rate low, and you would make your employees happy.

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