While companies normally record and report costs such as wages and benefits, workman’s compensation insurance, utilities, materials and space, most companies don’t track and report the cost of employee turnover.

How to Estimate Turnover Costs

• SHRM, the Society for Human Resource Management, once estimated that it costs $3,500.00 to replace one $8.00 per hour employee when all costs — recruiting, interviewing, hiring, training, reduced productivity, etc., were considered. But SHRM’s estimate was the lowest of 17 nationally respected companies who calculate this cost!

• Do a quick calculation: Think of a job in your organization that has experienced high turnover, maybe supervisors. Estimate their annual average pay and the number of supervisors you lose annually. If their average annual pay is $40,000, multiply this by 1.25 (125% of their annual pay). The result? It costs $50,000 to replace just one supervisor. If you lose ten supervisors a year, you’re spending $500,000 in replacement costs just for supervisors.

Do These Numbers Seem Unbelievable?

Actual turnover costs are usually much higher than we think they are.

If you want to find out exactly how much turnover is costing your organization, find an online employee turnover calculator. Just remember that only tangible costs can be calculated on these sites. Intangible costs are just as real and sometimes much greater than quantifiable costs, but they are difficult if not impossible to measure.

Why Don’t More Companies See This as a Costly Problem?

Many companies don’t realize the true cost of turnover, which costs companies in both expertise and dollars, because they have never examined it. Here are four possible reasons:

1. No process is in place to tabulate the costs of turnover.

2. If they are measured, those costs are not reported to top management.

3. Employers think it’s an inescapable cost of doing business — but it’s not!

4. Costs are underestimated, so they don’t cause concern.

How Can You Measure Turnover Costs in Your Organization?

A comprehensive program measures the following costs:

• · Separation costs
• · Replacement costs
• · Training costs
• · Vacancy costs

Separation costs include:

• administrative functions related to termination
• separation/severance pay
• any increase in unemployment compensation.

Replacement costs include the cost of:

• attracting applicants
• interviews
• preemployment administrative expenses
• acquisition and dissemination of information.

Training costs include both formal and informal training costs. Vacancy costs include the net cost incurred due to increased overtime or temporary employees needed to complete the tasks of the vacant position.

How can you reduce turnover?

When turnover costs are unacceptably high, do an assessment. Find out who is leaving and why. Exit interviews can help you gain information. Then develop a retention program based on your findings.

As an award-winning employment agency serving central Texas employers since 1993, Priority Personnel can help you lower your turnover costs. Contact us today!

Financial constraints and demanding work schedules have made work a higher priority than ever for Americans.  A recent study by CareerBuilder shows that, as a result, many U.S. workers are foregoing vacation plans this year:

• 24 percent of full-time workers say they can’t afford to take a vacation in 2011, up from 21 percent in 2010.
• An additional 12 percent can afford a vacation but don’t have plans to take one in 2011.

While these statistics may mean more total hours worked in your organization, your company might actually see greater benefits from encouraging employees to take time-off.

Why?

Overwork can increase absenteeism, burnout and turnover, and make employees more prone to errors on the job.  Conversely, workers with a healthy work/life balance tend to have less burnout, greater creativity and higher quality output.  And when things get stressful on the job, “balanced” employees are better equipped to handle the burden.  Bottom line, taking time-off is vital not only to an employee’s well-being and performance, but to your company’s, too.

As our economy heals, here are a few recommendations for encouraging your workers to take the time-off they need, while keeping your business running smoothly:

• Require sufficient notice.  If you don’t have one, develop formal policy outlining guidelines for taking vacation (i.e., giving adequate notice, coordinating with other employees’ requests for time-off, scheduling time-off before or after big projects/events, etc.).  The more lead-time you have, the better equipped your company will be to handle the extra workload.
• Encourage shorter, more frequent breaks. If employees can’t take a number of days off at once, suggest they take long weekends or midweek breaks.  Shorter vacations still afford employees the ability to recharge, with less disruption to your workflow.
• Ensure adequate coverage. Require employees to cross-train and prepare co-workers, to ensure adequate coverage while they’re gone.  At a minimum, ask employees to review: critical responsibilities, upcoming deadlines, where information is stored, key contacts and parameters for reaching them while they’re on vacation.
• Lead by example. Are you a workaholic?  If so, here’s a perfect reason to reform your ways.  Management support for work/life balance is critical and must come from the top.  Set an example of maintaining a healthy balance and make it known that the same is expected from rank-and-file employees, too.
• Call Priority Personnel for the support you need. If your business is like most, your staff is already stretched thin.  When one person goes on vacation, it can be difficult for others to manage the additional workload.  Call Priority Personnel to provide the talented, reliable individuals you need during vacation periods.  Our employees hit the ground running and keep your business running smoothly, so your employees can take the time-off they deserve.

This month’s Great Idea will show you how you can inspire your employees and increase loyalty, passion, and engagement throughout your work force.

Looking for more ways to increase productivity? Give me a call at 512-392-2323.

Unfortunately, this story is becoming an all too common occurrence. In fact, as many as 30% of job seekers exaggerate or outright lie on their resumes.

So what can you do?

This issue of Great Ideas highlights the importance of doing thorough background checks.

Discover more about the HIRE Act and determine if your company is eligible for any tax breaks.