On a country-wide level, turnover costs businesses $1 trillion, according to Gallup. On an individual level, the Society for Human Resource Management (SHRM) reported that it costs a company six to nine months of an employee’s salary to replace them. As an example, an employee making $60,000 per year would cost $30,000 to $45,000 in recruiting and training costs to replace.
If you think the cost of replacing an employee is less relevant for hourly workers, consider this: a vacancy for an employee who makes $14 an hour can end up costing you more than $200 per day.
What contributes to the massive costs of replacing an employee?
The costs noted earlier are based on both recruiting and training. This can include advertising the position, using the time of a recruiter, hours spent reviewing and interviewing candidates, and time spent by other employees who are taking on the work of the person who left.
Once the recruiter or hiring manager finds the perfect person, there is the cost of onboarding. In most careers and businesses, an employee doesn’t hit the ground running on day one. It can be six months to a year before they can work independently. It makes sense then that companies should focus on keeping their employees as long as possible.
In addition to the time and money needed to replace an employee, there are the intangible costs. For example, high turnover can affect team morale. If everyone around you seems to be leaving, you might question if there is a better opportunity elsewhere.
Another intangible loss can be felt at the managerial level. You presumably hired that person because they have talent, good ideas, and can solve problems. Losing great employees can affect the operations of your business.
One cost some may not consider when thinking about the cost of replacing an employee is the potential reputation hit your business can take if an employee leaves on bad terms. Employees who leave because of negative circumstances or a dispute often leave negative reviews or do what they can to tarnish the name of the business. This type of bad press could discourage future applicants and customers from choosing to work with your business.
Reduce the cost of replacing an employee by partnering with Employbridge
We can help you minimize the cost of replacing an employee through our tailored solutions, including professional and direct hire, contract-to-hire, temp, and gig staffing programs and services. Our consultative approach helps organizations streamline hiring processes, improve efficiency, and drive cost savings.
Ready to learn more? Contact us for a consultation on how Employbridge can help.
