Monday, February 4, 2008

Employee Turnover

Employee turnover is a ratio comparison of the number of employees a company must replace in a given time period to the average number of total employees. A huge concern to most companies, employee turnover is a costly expense especially in lower paying job roles, for which the employee turnover rate is highest. Many factors play a role in the employee turnover rate of any company, and these can stem from both the employer and the employees. Wages, company benefits, employee attendance, and job performance are all factors that play a significant role in employee turnover.

Companies take a deep interest in their employee turnover rate because it is a costly part of doing business. When a company must replace a worker, the company incurs direct and indirect expenses. These expenses include the cost of advertising, headhunting fees, human resource costs, loss of productivity, new hire training, and customer retention -- all of which can add up to anywhere from 30 to 200 percent of a single employee's annual wages or salary, depending on the industry and the job role being filled.
While lower paying job roles experience an overall higher average of employee turnover, they tend to cost companies less per replacement employee than do higher paying job roles. However, they incur the cost more often. For these reasons, most companies focus on employee retention strategies regardless of pay levels.

Most companies find that employee turnover is reduced when they address issues that affect overall company morale. By offering employees benefits such as reasonable flexibility with work and family balance, performance reviews, and performance based incentives, along with traditional benefits such as paid holidays or sick days, companies are better able to manage their employee turnover rates. The extent a company will go to in order to retain employees depends not only on employee replacement costs, but also on overall company performance. If a company is not getting the performance it is paying for, replacement cost is a small price to pay in the long run.
Nothing can be more frustrating to a small business owner or manager than the constant aggravation of employee turnover. High or low employee turnover can be detrimental to your company. Learn what you need to know to calculate and curtail the revolving employee exit door in your business.

Employee turnover can vary as a result of the industry and location of your business. For instance, the food service industry typically experiences turnover of 100-300%. The stress of employee turnover is much greater on smaller businesses than larger corporations. Before you can take effective measures to reduce turnover, you first need to find the price your business pays in lost employees.

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