How Employee Turnover Influences the Finances of your Organization?

When employees leave your organization, the workflow disrupts productivity decreases and the costs of hiring increases.
Now, you may say that this is not the case as employee turnover doesn’t seem to impact your business so much.
Let’s analyze the impact of employee turnover before we move forward.

Recent data reveals that your employees can quickly achieve more salary if they leave jobs. Of course, many employees realize this, which makes them grab new opportunities. When they go for a better job, you have to hire a new employee.
Well, this inevitably comes at a price.

It is unlikely for you to hire a new employee on the same payroll. It is even hard to find an employee with the same skill set. Hence, you have to compromise – you pay more and settle for less experience. These are just the drawbacks of high turnover that you can acknowledge.

What else happens?

After one employee leaves, his work falls upon other team members. Naturally, the burden on these team members increases. Hence, you stand a risk of losing more people if you don’t handle the situation soon.

Then, you may have spent time training and guiding the previous employee. All this guidance and training would be taken away from your organization. It would be used for your competitors.

Lastly, when you go on a hiring hunt, you have to put in money to attract people. Posting job roles, organizing interviews, or hiring a consulting agency, everything costs money.

Let’s discuss the financial impact of employee turnover on the organization.

The Cost of High Employee Turnover

High Hiring Cost
Posting ads, screening candidates, and interviewing potential candidates, everything takes a lot of money. You have to fly people in from different locations, pay for their food and accommodation. The more candidates you interview, the more money you spend on hiring.

Decreased Productivity
We have already discussed how an employee can cause the workload to increase on other employees when he or she leaves. What we didn’t consider is that your new hire can take up to 1-2 years for reaching the same work and skill level as the previous employee. This means that your turnover rate consistently puts a burden on your existing employees.

Everybody has to maintain a work-life balance, and everybody can handle only the designated amount of work in a day. When you increase this work, you reduce your chances of employee retention.

Reduced Employee Engagement
This is directly related to the above point. More work pressure leads to reduced employee engagement. People start feeling overburdened with responsibilities, which causes workplace stress and low commitment.

Further, high turnover eventually impacts every employee. It forces the existing staff to re-think their job roles in your organization. It is truly a domino effect.

Increased Chances of Errors
When existing employees are burdened with more work, they make errors. Moreover, even your new employees are new to your work culture, so they also make errors. Overall, the error rates go up for the whole organization. This ends up reducing your customer satisfaction.

How Can You Reduce Employee Turnover?

First, take a deep breath. Then, start by evaluating your HR structure. Evaluate the following questions:

• How happy are your employees with work?
• How comfortable are your employees with the company culture?
• How satisfied are your employees with their compensation?
• What is the level upskilling you are considering?
• How much are you supporting employees’ growth?

Once you know the present situation, you can evaluate the plan.

• Start by creating a culture of innovation.
• Encourage training, learning, and growth in the workplace.
• Reduce the work hours or make the workplace flexible – allow the employees to leave when they have completed work.
• Offer competitive compensation.
• Offer employee insurance.
• Offer paid sick leaves.

Conclusion
Reducing employee turnover and increasing employee engagement can make your organization more productive. This helps in improving the profitability of the business and reducing the total costs incurred on hiring new employees.

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HR Connect In house Author

HR Connect In house Author

Our inhouse authors have expertise in several areas of HR and Payroll. Their content contributions have been published in leading blogs, websites and print publications.
HR Connect In house Author

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