May 7, 2018
May 11, 2018
Your organization expends a huge amount of time and energy around hiring. Shouldn’t it expend just as much – if not more – on retention?
Employee attrition is incredibly costly. Not only is it a waste of recruitment funding, but it necessitates even more spending for replacement hires. Furthermore, departing employees may take critical knowledge and skills with them, or possibly damage client relationships.
A study by the Center for American Progress found that for jobs requiring specific skills, the cost of turnover can be 21 percent of an employee’s salary. For higher-level positions, however, the cost is even greater: Some companies spend up to 213 percent of salary to replace a senior- or executive-level employee.
Your organization should also take into account that the average time it takes to fill a position is 42 days, according to the Society for Human Resource Management (SHRM). This is a long period to go through without having your top talent on board.
There are several ways you can calculate the cost of attrition. LinkedIn Learning provides a calculator that takes into account two metrics from SHRM:
Using this calculator, the cost to replace a senior-level employee or one with specialized technical knowledge is a staggering $312,500.
SHRM also offers a formula for calculating the specific, detailed costs of turnover. Its formula incorporates 11 data points, including annual revenue divided by the number of full-time equivalent employees, the expenses associated with exit interviews and money spent on advertising a vacancy.
To reduce the rate of attrition, it’s helpful for employers to understand the reasons why workers leave.
Of course, not all attrition is the employee’s choice – individuals might be let go for performance-related or disciplinary reasons.
However, voluntary turnover is more common. SHRM found that the annual voluntary turnover rate is 19 percent, compared to the annual rate of involuntary turnover of 8 percent.
People leave their jobs for a variety of reasons, but the three factors most critical to retention are company culture, salary and professional development, according to a study by Glassdoor.
Taking another look at culture, pay and professional development opportunities can help a company keep top talent on board longer. In its “Why Do Workers Quit?” report, Glassdoor found that just a one-star increase in the rating for each of the these three categories increased the likelihood than an employee would stay at a company by 4 to 5 percent.
To help lower attrition at your organization, consider the following: