The Hidden Costs of Employee Turnover

Are you worried about your company's cost of survival going high and still could not find the reason behind it? In the world of entrepreneurs, there is no edge to competition. There are several factors affecting the survival cost of a company. Among these are one cost which several entrepreneurs forget to include in their cost sheet, but this cost not only shakes your budget but can be a tornado for your entire business. It is none other than the attrition rate of the employees.

Employee turnover has some obvious costs associated with it, including recruitment, training and salary. Every time an employee leaves the company, there are varieties of hidden costs that you might have not considered, as you do not write any account for these costs. The following points might help you the next time to calculate the exact cost of attrition that is adding up to your account like a thief.

Ripple Effect

Turnover of employees have impact on the peer group, as well as the management chain, making everyone less effective. The co-workers have to supplement the shortage in production, which distracts them from achieving their own performance goals while managers need to devote time to finding a new employee. This performance disaster in terms of production loss and others are hidden costs to the company, which they usually do not consider.

The Cost of Recruitment

Each time an employee leaves your company, it gifts you an additional cost of hiring and selection cycle. These costs can be significantly attached to any one of these; advertising costs to announce your job opening to the masses, cost of recruitment agency, background checks, health testing, cost of overtime pay for those who are supplementing the production vacuum, temporary help and much more.

Once you have made a hiring decision, the costs of turnover do not stop. Other costs, like signing of bonds, relocation costs and any increases in salary level that is necessary to attract new talent, all adds up.

Training Costs

Hiring a new employee does not end the task. You need to train them and the time spent by the HR managers can also be costly and unnecessary. If you hire an experienced person, then you save in terms of training cost, but instead you have to pay them higher salary for their experience. With a better employee retention strategy, you can avoid these costs.

Losing Customers

Remember the movie "Rocket Singh - Salesman of the Year". When Harpreet Singh Bedi when leaves the company, several clients also follows him, just because, they were not loyal to the company, but were loyal to Harpreet Singh Bedi. This usually happens even with the best and biggest companies, where the employee has a good reputation among the clients and the clients do business just because of these employees.

When a knowledgeable employee leaves, taking experience and customer service ability with him or her that has an impact on customer satisfaction. Customer commitments are not often met and the company loses them. Even dealing with trainees can sometimes be challenging and if you have a lot of unwanted turnover, customers can get annoyed or even start to lose interest in your company and products.

Losing Credibility

With high attrition rate, companies usually tend to lose their credibility in the market in terms of being one of the best companies to work in. The management loses credibility when it creates an environment with excessive turnover and existing employees can become demoralized and decide to move on. The best employees will take a toll over thinking about joining your company.