Priority Personnel Blog

What Employee Turnover Really Costs Your Company

December 13th, 2011

Many surveys say that the number one issue facing businesses today is finding and keeping good employees. That’s partially because nationally, the average annual employee turnover rate is 14.4 percent – and it can cost companies thousands or even millions of dollars a year.

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!



Job Interview Preparation – How to Land Your Dream Job

November 29th, 2010

You prepared for the interview, you wore your best business attire, and you handled every question beautifully. Then comes that one question that can make or break your interview–so you better be prepared for it!

What is one of the most important interview questions you are sure to be asked? Read on to find out.

Seasonal Help: Why You Should Plan Your Staffing Needs Now

October 5th, 2010

Admittedly, it may be a little early to light a Yule log. 

But if you’re in the customer service, administrative/clerical, hospitality, shipping/delivery, inventory or technology/finance industries, you’re probably headed for a busy – if not your busiest – time of year.  If you’re going to require extra help this holiday season, it’s definitely not too early to plan for your staffing needs.

Here are just a few reasons why:

  • Prevent rash hiring decisions.  If you wait until the last minute to recruit and hire, you may find yourself “up against a wall” when business suddenly surges.  Waiting until your needs are urgent may force you to make hasty hiring decisions.
  • Get a jump on your competitors.  Many companies will wait until next month to gear-up.  Why not start your efforts now and reach the most qualified candidates before other seasonal employers get them?
  • Avoid being overwhelmed.  This year’s seasonal job market will be flooded with applicants.  With so many job seekers competing for positions, the sheer volume of résumés and applications may bog you down.  Give yourself as much time as possible to find the best candidates by starting the search process early.

If just reading about seasonal hiring makes your stomach churn, relax – you don’t have to do it alone.  Staffing firms specialize in helping companies like yours effectively manage the highs and lows of business cycles.  Plan your workforce needs now with your staffing partner to:

  • Get the flexibility you need.  Seasonal temporaries can handle surges in demand without impacting fixed expenses.
  • Say “goodbye” to post-holiday layoffs.  Since the staffing service is the seasonal employees’ employer of record, you can avoid the hassle and expense of letting workers go once things slow down.
  • Access the talent you need, right when you need it.  Planning your workforce needs now gives your staffing firm time to locate the most qualified staff for you, especially when you require a large number of workers – so they’re available right when you need them.
  • Shorten learning curves.  Your staffing provider will recruit seasonal workers with the specific skills and experience you require.  The provider can also, at your request, develop customized orientation materials to help reduce training costs and get workers up-to-speed more quickly.
  • Eliminate additional administrative and legal burdens.  By using temporary employees, you avoid the social security, payroll and other tax and legal burdens associated with seasonal employees.  Freedom from these hassles will give you more time to focus on other important priorities.
  • Cut back on overtime.  Temporary employees help you minimize the additional cost and burnout overtime causes.

Plan Your Workforce Needs with Priority Personnel

If your business has frequent or predictable surges in demand, a planned staffing option may be right for you.  Planned staffing is the strategic use of temporaries to accommodate workloads known to vary in seasons or other cycles.

First, a Priority Personnel staffing expert will work with you to examine year-round fluctuations in workload and identify peak demand periods.  Next, we will create a customized staffing plan for your business that: provides temporary employees to handle your busiest times; reduces or eliminates your need to lay off employees during slow periods; frees you to focus on the most critical parts of your job.

Remember, the early bird gets the worm – it’s never too early to discuss your staffing needs with Priority Personnel.

Getting Ahead and Impressing Your Boss

August 23rd, 2010

“I hate it when employees just sit there and agree with everything I say.”

Those were the thoughts of one CEO who describes how he appreciates when employees actually push back and challenge his ideas.

In this month’s Career Club, we’ll show you how to effectively push back, say “no,” and still advance your career.  Follow these tips to gain the respect of your boss and get ahead in your career.

Overtime vs. Temporary Staffing – A Cost Analysis

July 20th, 2010

You’ve just won a three-month contract with a major new client – congratulations!  Now, you need to figure out how to get the extra work done.

Should you pay your current employees overtime, or bring in temporary help?  Consider the following sample cost analysis.  It is based on an annual salary of $40,000 ($20.51/hr.), vs. time-and-one-half overtime, for one employee:

Cost Analysis

Expenses Paying Overtime Using a Temporary
Hourly Wage $30.77 $32.82*
Fringe Benefits** $9.54 $0
Administrative/Payroll*** $3.69 $0
Over 3 months x 450 hours x 450 hours
Total Cost $19,802.00 $14,767.20

Although this is just a sample exercise for illustration purposes, it clearly demonstrates the economic rationale for using temporary employees.  When you need additional productive hours on a temporary basis, staffing services can lower costs, reduce burnout and improve the productivity of your direct staff.

Priority Personnel – Central Texas’ Staffing Economics Experts

Need help assessing the cost of a staffing strategy? Contact Priority Personnel. Our experts will work with you to determine the most productive and cost-effective way to get your work done.

Cost Analysis Assumptions

* Temporary staffing rates vary by market, but the relationship (ratio) between pay rates remains the same.

** Fringe benefits include:  holiday pay, sick leave, vacation pay, personal days, insurance, F.I.C.A., S.U.I., F.U.T.A., worker’s compensation, etc., based on a national average of 31%.

*** Based on U.S. Chamber of Commerce national average statistic of 12%, which includes firms that pay no benefits.  For small firms with moderate benefits programs, this cost is typically 40-45% of payroll, and for larger firms with extensive benefits programs, the cost can be up to 100% or more of payroll.

Get Your Resume to Work for You

May 30th, 2010

In this job market you want to make sure that your resume gets to the top of the pile.

The secret to success lies in two areas:

  1. Your cover letter
  2. The keywords you use

This article will show you a few tricks that will get your resume noticed by hiring manager.

How Twitter Can Help Your Career

March 11th, 2010

From finding out what your favorite celebrity is up to to finding expert advice, Twitter has proved to be a fun and useful resource for many people.  But sometimes it can be a little overwhelming to sort through the clutter to find good information.

So we’ve done it for you!

To help you weed out the good advice from the bad, we’ve put together a quick list of Tweeters you may want to add to your follow list.  These are people that continually share helpful information–from interview best practices to tips on landing a promotion.

We hope you find these Career-Minded Tweeters helpful!

The Keys to Getting a Job Promotion

January 26th, 2010

Have you ever noticed that some people always seem to end up climbing the career ladder faster than everyone else?  While it could be because Mom or Dad is the boss, more than likely it’s because they work hard and follow these five tips:

  • Always display a positive attitude.
    Your attitude can be a powerful self-fulfilling prophecy.  If you have a negative attitude, 9 times out of 10 you will fail.  But, if you bring a positive attitude and display confidence, strength, and determination, you WILL be successful.
  • Stay educated.
    The best way to ensure success is to stay one step ahead. Research your industry. Know what’s happening and what the experts say will happen. Look for trends. When you find them, start to train yourself in these areas. Knowledge is power.
  • Create a personal elevator pitch.
    First impressions mean a lot.  If you only had 30 seconds to convince someone you were a hard-worker and a leader, what would you say and do?  Plan this ahead of time; you never know when it will be needed.
  • Learn to network.
    Unfortunately sometimes it’s not what you know, but who you know (at least to begin with).  Learn to network. You can even network within your own company. Invite co-workers to lunch. Take the time to walk by someone’s office to say hello. And actively seek out opportunities to network outside of work by joining organizations, groups, etc.  You start by seeking out your local chamber of commerce to learn of upcoming events.
  • Be open to new opportunities.
    Read trade publications. Listen to people in your network.  When a new opportunity presents itself, don’t sit back and wait.  Take the initiative to inquire more–and don’t be shy!

And speaking of new opportunities, if you’re in the market for a new job or just curious about what is out there, please call us today.  As San Marcos’ leading employment agency, we offer a variety of excellent jobs.