It Costs How Much to Replace an Employee?

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Retaining your good employees

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How is It Costs How Much to Replace an Employee?

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The Right habitancy in the Right Places 

Studies show that the average cost to replace a worker in the Us is ,000.00 (Average!!). Some Hr managers use the rule of thumb that anything the person's annual wages is - it will cost that much to replace them. One study evaluating the effects of the Us family medical Leave Act found that "turnover costs for a manager average 150% of salary, including real costs of hiring... And intangible costs such as the new worker's inefficiency and lost productivity while the job is vacant."

Costs of lost productivity are as important as direct costs such as advertising or temporary staff. Total costs no ifs ands or buts reach 150% of the annual compensation. The cost will be significantly higher (200% to 250%) for managerial and sales positions.

Bliss & company Inc., Wayne, Nj consulting firm

Oh, and if you think you can just hire temporary workers and avoid all those costs, think again. The cost of hiring and getting output from a temporary worker is nearly 40% of their salary, and temporary workers tend to have higher hourly rates than permanent ones - and higher turnover rates as well.

Let's put this in real terms.   The lowest estimate I have seen in any place says it will cost you at least 30% of an employee's total annual compensation to replace them. Assume you have 100 employees and your average wages is .00 per hour. At .00 per hour + benefits (at 20% of wages), your employees receive ~.00 hour in wages and benefits. Let's say that you have to replace 15% of your employees every year. Taking the most conservative appraisal for worker turnover costs that I have been able to find (30% of their annual wages and benefits); each worker you have to replace is costing you ,488.00. 

100 employees X 15% X 88 (including benefits) = 2,320 per year.

And that is using the most conservative cost ration I can find. If we decide to use the national average (,000 / substituted employee) the cost goes to 5,000.00. By using the 'rule-of-thumb' (100% of their annual wages - ,800.00/ substituted employee), the cost will go to 2,000.00... Staggering!

Why are the costs so high?

Why does it cost so much to replace a departing employee? Some costs, like paying off accrued vacation time or the cost of a help-wanted ad, are obvious.

Other costs include:

Increased unemployment assurance costs Lost productivity while there is a vacancy Time costs for the disjunction (Exit) interview (If your good employees are leaving, you Need to know why) disjunction bargain costs (legal, financial, medical, withdrawal cash-out, etc.) Overtime from other employees to cope the vacancy (which can lead to burn-out or absenteeism) Time costs to relate resumes Time costs to interview candidates Interview expenses for the candidates possible voyage expenses possible relocation expenses Head-hunter or signing bonus fees added bookkeeping; payroll, 401k, etc. added description keeping for government agencies Reduced productivity while the new worker gets up to speed Training programs Corporate history lost Morale can be affected Intellectual asset lost
There are also risks linked with losing an employee.

Threat of lawsuit Bad Pr from disgruntled employee Threat that the worker will take clients to a new firm

What can be done about it?

Job descriptions:

Put together a perfect job description with tasks and duties outlined in a clear and concise way so that when man answers your want ad, they know what they are applying for. Minimize that catch-all phrase "Other duties as assigned". This way, the worker knows what is foreseen, of the position and the manager knows what to rate for execution reviews.

Pre & Post employment testing: 

Job match/satisfaction can be measured by using the testing and appraisal systems that are available through Rp2-Consulting. The cost of these appraisal and testing programs is significantly less than the cost of turnover in the first example above. We can test a candidate before they even show up for an interview and tell you if they have the right attitude, will show up for work when foreseen, and won't take everything in the furnish cabinet home with them. We can match new candidates to a given position. We have all heard of the 'Peter Principle' (an personel rises to his level of incompetence). We can look at your existing employees and match their skills and personalities with open positions in the organization. We can also help you recognize the right habitancy to put on teams. When teams are balanced (one person's strengths cover other person's weaknesses), results are significantly improved. Finally, managers (and Ceo's) need to know their strengths and weaknesses, as those who work with them comprehend them. Testing can show you what your true strengths and weaknesses are so that you can focus on improving those things that need to be improved.

Training:

Expecting man to furnish when they do not know how to produce, or what results are needed is absurd. Yet every day, habitancy are hired to do jobs in which they have wee or no formal training. Make sure that your employees get the training and advice they need to meet your expectations. This will lead to better worker job delight and reduced supervision stress. As a significant side benefit, well-trained employees are more likely to win appreciation for a job well done; and appreciation and recognition among your peers is a huge motivator. We can help you make your training programs to meet your personel needs.

Leadership:

The best plans and initiatives are all for naught if your leadership does not focus on what is working and where you want to go. Have you ever been backing out of your driveway focused on the trash-can you had to avoid hitting at all costs - it's right there in the mirror, just behind the vehicle, if you hit it your whole morning will be ruined - and like a laser, you run right into it...

We go where we focus. One key to your success is to focus on retaining your employees. Working to make them flourishing is far less costly than replacing them. Treating them with respect and honor while development them feel like they have a stake in the firm and its success will lead to your success. Focus on where you want to go not where you don't want to go. Looking at mistakes and Looking fault is focusing on the past and the errors made there. Learn from mistakes and move on. Plan the hereafter your organization wants. Focus on applauding success, both individually and for the team/company.   

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