A good employee is neither easy or inexpensive to replace, though, some employee turnover is good and is an essential part of any business. Those that do well are promoted, those that under-perform are let go. This type of employee movement is good for an organization, it puts the talent in the right spots and makes room for new growth. What happens when you start to see too much employee turnover? While not uncommon in the hospitality and entertainment industries, when you lose employees at a high rate, it can start to cost you.
Retaining an employee is much cheaper than hiring a new one, not only because of lost time and the cost of the hiring process, but also new employees are inexperienced and must be trained before they can be fully productive. With inexperience also comes an increased potential for injury, which can raise the number of workers’ compensation claims filed by your employees. This can result in hefty insurance rate increases.
Cost of Turnover
Hiring processes have become increasingly more complex over the years. There is a substantial amount invested in even considering an applicant for a certain position. Besides the time put in by those doing the hiring, things like drug screens and background checks add to the cost of bringing on new employees. However, even though these processes slow down the progression, it is important that you hire employees who will not become liabilities for your company in the future. The background checks, in-depth interviews and other safeguards that increase your chances of getting a valuable employee are essential.
On the other hand, the search for suitable employees can leave positions vacant for a significant amount of time, causing a loss in productivity along with other general interruptions to your operations; it is important to weigh the risks of hiring a potential liability against the risks of employee shortage.
Even after a new employee is hired, replacement costs may still continue. Regardless of their experience in the field, new employees must be trained in the specific requirements of the position. During this time, they will not be as productive as other employees. Since they are working in an unfamiliar environment, new employees are also at an increased risk for getting hurt at work. Jobs may present unique hazards that are unknown to the new hire, increasing the chance of an injury that will result in a workers’ compensation claim. A high number of workers’ compensation claims mean an increased cost to your insurer. Insurance providers take this into account when deciding coverage costs for companies with high employee turnover, which can mean higher premiums for you.
If you have productive employees who do quality work, the financial benefit of keeping them around is obvious. The key to reducing costs and keeping premiums low is hiring the right people from the start, investing money in effective training and emphasizing the importance of safety on the job. Job satisfaction also plays a key role, so keeping employees happy will also play an integral part in protecting your company’s bottom line.
Retaining productive and experienced staff can go a long way in your cost-saving efforts. Not only do you avoid hiring costs, but experienced employees allow your company to operate at a much safer level. A safer workplace means fewer injuries resulting in workers’ compensation costs, saving you money in the long run. For more information on managing your risk through each point of your business, click here.