Most employers have at least a gut sense about the high cost of employee turnover. But exactly how much does it really cost companies to lose talent, in terms that go beyond just dollars lost?
For answers, FlexJobs turned to Audra Aulabaugh, Head of People Operations at Polly, an employee engagement tool integrated on Slack, Teams, and Zoom for instant connection and feedback across work groups, including hybrid and fully remote teams.
“Costs are high and include accounting for things such as rehiring and time involved, lost productivity to deliver on goals and objectives, overtime for those team members covering the gap, likely a higher compensation of a new person coming in (rough estimates are up to 20% higher), bandwidth considerations to get the new hire up-to-speed by the existing team, plus impact to team morale,” Aulabaugh summarized.
For a more numerical glance, the proof is well documented in studies. For example, according to Gallup, voluntary employee turnover costs American businesses trillions of dollars every year. And this doesn’t even account for involuntary termination events like layoffs, which add significantly to these costs.
“On an individual basis, that means the average cost of employee turnover can range from 50% to 200% of that employee’s annual salary,” Aulabaugh explained. “Even the smallest estimate of that can be staggering to your organization’s bottom line.” And that’s certainly even more so the case if you multiply these ballpark figures across all of the employees you’ve shed over the past year.
The total cost to any organization depends on a number of factors, such as the departing employee’s functional role, their productivity/output compared with their peers, and your specific type of organization. Aulabaugh and her team at Polly have drilled down extensively into the topic of high turnover. In addition to the more quantitative financial costs, they have highlighted a number of other hidden, less obvious costs that can be significant, yet aren’t as easy to quantify and measure. These include:
Decreased Morale and Engagement
This refers to the employees left behind in the wake of turnover. If the person departing holds a leadership role or another significant cultural role in the company, morale can temporarily or permanently suffer company-wide.
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Lost Organizational Knowledge and Culture
When someone leaves the company for good, they take along with them their piece of the company’s history and knowledge that had been invested in them. While it isn’t reasonable to assume employees will stay forever, decreasing the number of people who walk out the door taking a piece of company culture with them is important.
Ramping Time
Even top talent requires time to get up to speed and learn a new job. As seasoned employees are tethered to training during ramp-up time, everyone loses productivity, which ultimately leads to lost revenue, potentially for up to a year.
Training Costs
Related to ramping time is the cost of the training itself. Communicating procedures and methodologies to new hires—and ensuring trainers are on board to share knowledge—can be pricey in terms of money and time.
Polly’s HR team has also identified the following causes of a company’s high turnover rate:
- Compensation
- Culture
- Poor preboarding or onboarding
- Lack of horizontal or lateral mobility
- Wasted time and effort
Examine the Cause, Avoid the Costs
If your teams are suffering from high turnover, be sure to reexamine your organization’s approach to each of these five issues above. By addressing these root causes proactively, you can potentially stem the tide and avoid the many high costs of employee turnover.
In the meantime, FlexJobs is here to help you connect with remote talent.
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