The True Cost of Employee Turnover

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Turnover has always been a burden on a business
owner’s bottom line. When turnover runs rampant in
the workplace:
Understanding what is causing employee turnover is critical for employers who want to reduce
costs and create an employee experience that will help their business truly differentiate.
Reducing turnover has always been a challenge with no one-size-fits-all solution. However,
in 2019, against the backdrop of a historically competitive labor market and an increasingly
diverse workforce now comprised of four generations of workers with differing needs and
expectations, it’s become especially tricky.
In this book, we’ll take a closer look at multiple industries
to understand the true cost of turnover, common causes of
turnover, how turnover varies by industry, position and
demographic, and solutions for meeting employee needs
and expectations.
What’s important to a
millennial in the foodservice
industry may be different than
what a baby boomer in the
healthcare field wants.
Employee
Engagement
Drops
Productivity
Worsens
Quality
of Service
Decreases
Previously
Unaffected
Employees Lose
Momentum
The True Cost of Turnover
There are hidden and visible costs associated with employee turnover.
Regardless of industry, turnover can be costly. SHRM predicts that every time a business
replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making
$40,000 a year, that could equate to $20,000 to $30,000 in training and recruiting expenses.
A CAP study took a closer look at how costs vary depending on position within the company.
They found average costs to replace an employee are:
16 percent of annual salary for high-turnover, low-paying jobs (earning under $30,000 a
year). For example, the cost to replace a $10/hour retail employee would be $3,328.
20 percent of annual salary for midrange positions (earning $30,000 to $50,000 a
year). For example, the cost to replace a $40k manager would be $8,000.
Up to 213 percent of annual salary for highly educated executive positions. For
example, the cost to replace a $100k CEO is $213,000.
Visible Costs of
Turnover
There are obvious and tangible costs
associated with an employee’s departure that
are easy to calculate, track, and anticipate.
These include:
• Recruiting costs
• Onboarding and training costs
• Cost of promoting vacant positions
• Cost of temporary staff to cover open
positions
Hidden Costs of
Turnover
There are some not so obvious costs that
are not as easy to calculate and which
fluctuate depending on the employee or role.
These include:
• Lost productivity
• Lost expertise and knowledge
• Decreased employee morale
• Increased absenteeism
• Decreased service or product quality
Want to know how much turnover costs your company?
Contact Us to Find Out
Turnover Statistics by Region
The total cost of turnover for a company will depend on how many employees leave an
organization each year. According to the North America Mercer Turnover Survey, US companies
had an average turnover rate of 22 percent in 2018.
More granularly, the Bureau of Labor Statistics, looks at turnover rates by region. From 2014 to
2018, the southern states in the United States have held the highest employee turnover rates of
the nation.
The Western and Midwestern regions of the country alternate holding the second highest
employee turnover rates in the nation, year-over-year, As of 2018, the Midwest stands as second
place for the region with the highest turnover.
However, regardless of geographic location, not all industries are created equally. Some have a
much higher turnover rate than others.

In the healthcare industry:
• Pharmacist: 8.3 percent
• Medical Technologist: 10.5 percent
• Physical Therapist: 10.7 percent
• Radiologic Technologist: 10.8 percent
• Physician Assistant (PA): 14.2 percent
• Bedside registered nurse: 16.8 percent
• Patient Care Tech (PCT): 19.3 percent
• Certified Nursing Assistant (CNA): 27.7 percent
In the retail industry:
• Corporate office: 15.6 percent
• Part-time hourly store workers: 81 percent
• Full-time hourly store employees: 65 percent
• Retail distribution positions: 23 percent
In the hospitality industry:
• Management: 25 percent
• Operational employees (including restaurant
and bar, housekeeping, and front office)
50.74 percent
In senior care facilities:
• Registered nurses (RNs):
Between 55-75 percent
• Licensed vocational nurses (LVNs):
Between 55-75 percent
• Certified nurses aides (CNAs):
100 percent and higher
CNAs in senior care
facilities have
100%
& higher
turnover rates
Causes of Turnover by Demographic
With Baby Boomer employees staying in their careers longer and an increasing number of
Gen Z employees entering the job market, the modern workforce is now comprised of four
generations of workers, each with their own set of expectations.
The nuances of these expectations exacerbate the turnover problem — employers now have
the Herculean task of accounting for all of these expectations if they hope to keep turnover
rates low.
Baby Boomers
According to Monster.com, most Baby Boomers part with their employers at this stage in their
professional journey because:
Keeping Baby Boomers onboard longer is more likely if an organization offers schedule
flexibility or continued learning opportunities.
Generation X
Research has shown that Generation X looks for organizations that respect
the following characteristics:
• Autonomy
• Independence
• Self-reliance
If Generation X employees feel like they are being micromanaged, or have little say in
workplace decisions, they are more likely to turnover. To keep Gen X around, employers must
cater to individualism and entrepreneurial spirits.
22% leave to care for a
family member or spouse
10% retire due to a lack of
transferable skills
60% leave due to health problems
Millennials
Millennials are already known job hoppers, as 21 percent of millennials say
they’ve changed jobs within the past year. (This is three times higher than
generations outside of the demographic.)
Understanding millennials’ need for a strong work-life balance is one way to cater to
this demographic.
Generation Z
Gen Z is just now starting to enter the workforce, and many in this age
demographic are working entry-level or part-time jobs to accommodate
schooling, or their current experience level. For that reason, seasonal
turnover, or churn that accompanies entry level positions skew
turnover statistics.
However, we are starting to become more intelligent about the
expectations Gen Z has of employers. For this age group, it boils down to:
• Money
• Job security
• Opportunity to advance
Additionally, according to the guide Get Ready for Generation Z, found that Gen Z job seekers
expect the salary for their first job out of college to be $46,799.
By investing in Gen Z you can be investing in long-term employees who are unlikely to turnover
due to their need for job security and desire to advance.
Research shows that top reasons why
millennials hop jobs include:
• Job lacks growth opportunities and
avenues for leadership development, 67
percent (Bridge)
• Didn’t trust their direct manager (34
percent)
• Because their organizations don’t set
goals (31 percent )
• Because their organization thought only
about profits (48 percent )
Further, the top priorities for
millennials when hunting for a
job are:
• Money (92 percent)
• Security (87 percent)
• Holidays/time off (86
percent)
• Great people (80 percent)
• Flexible working (79 percent)
• Benefits (64 percent) (Qualtrics)
Is there a common theme to
reducing turnover?
We think so. In our opinion, you can simplify the need of all four generations
into two classes:
ERINs
(Employees Requiring Income Now)
Employees in this class represent 78%
of Americans who are living paycheck to
paycheck and are financially unprepared for
an unexpected expense.
MAGGIEs
(Millennials And Gen Z who Get
Instant Everything)
Employees in this class are analytical and
astoundingly adept at accessing information
via technology. They have grown up in a world
where things like money, entertainment, and
transportation can be moved instantly, and as
such they expect real-time feedback in the
technology they use.
ERINs MAGGIEs
Why ERINs need a daily pay benefit
ERINs need simplicity and helpful ways to meet the demands of everyday living. With access to
a daily pay benefit, they are safeguarded from any unexpected expense and can continue to
pursue their financial goals free from setbacks like overdraft fees or resorting to payday loans.
DailyPay provides this by letting employees transfer earned wages instantly at any point in the
pay cycle.
Why MAGGIEs need a daily pay benefit
MAGGIEs are accustomed to tracking progress in real-time, be it steps in a health app or a
car location in a ride sharing app. They also want to be able to track their weekly financial
progress based on the work they’ve performed. DailyPay provides this transparency by allowing
MAGGIEs to track their accumulated wages for the current pay period, so they can see the full
picture and make informed decisions.
MAGGIEs are also heavily strapped with student debt, and having to juggle debt payments with
rent payments and other living expenses means that, at times, they too are ERINs.
Providing a benefit like DailyPay that can meet the needs of ERINs and MAGGIEs can go a
long way to strengthening the employer-employee bond, and increasing the tenure of the
average employee.

Source : https://www.hrexchangenetwork.com/hr-compensation-benefits/whitepapers/the-true-cost-of-employee-turnover?ty-ur

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