Frequent bad hires can lead to a lot of employee turnover. The more a business loses workers, the higher the cost. As a recruiter, you can show clients how the cost of employee turnover affects their businesses and why using your services could be a solution to high turnover rates.
What is the cost of employee turnover?
Employees are one of your clients’ biggest expenses. They are also one of their biggest assets. It’s important to hire the right candidates who will add value to their businesses over time.
Having high employee turnover means workers frequently leave a company. The company must hire new employees to replace them, costing money.
You need to source talented candidates who are likely to become long-term employees. And, you can help clients solve human resource issues by showing them ways to reduce employee turnover.
By looking at employee turnover metrics, you can see how much it costs your clients to lose employees. This information is important for clients to know. It can also help you market your services and land more job orders.
Employee turnover can be a cost to your recruiting business. When an employee you placed leaves, a client might rethink whether they should continue using your services.
On the other hand, lowering employee turnover rates can help your recruiting business in several ways:
- Increased client satisfaction
- More recruitment referrals
- More repeat clients and candidates
- Improved reputation
Clients want employees who can get the job done and won’t quit as soon as they’re hired. And, candidates want to be placed in jobs that meet their expectations. The more satisfied clients and candidates are, the less employee turnover occurs.
Cost of employee turnover statistics
Your clients know that employee turnover is bad. But, they might not know how it affects their bottom line. Showing clients data about the cost of employee turnover can be a big wake up call.
The following cost of employee turnover statistics can help your clients understand why it’s important to keep turnover low. Share this information when sourcing clients.
–Losing an employee can cost anywhere from 16% of a lower salaried employee’s earnings to 213% of the salary of a highly trained employee (Center for American Progress).
–A new employee can take up to two years to reach the same level of productivity as an existing staff member (Business Expert Josh Bersin).
–Forty percent of employees who left their jobs voluntarily in 2013 did so within six months of their start date (Equifax).
–About 64% of new hires in retail and about 66% of those in leisure industries leave within the first year (Equifax).
–As much as 80% of employee turnover is due to bad hiring decisions (Harvard Business Review).
As a recruiter, you can reduce bad hiring decisions for your clients. Show clients that sourcing talented, committed candidates leads to less employee turnover.
You can measure several employee turnover metrics. These recruiting metrics reveal where improvements could be made and how hiring decisions affect turnover.
Average length of employment shows how long a candidate stays at your client’s company. The more time they work for your client, the better. To find the average length of employment, add the total lengths of time each employee has been with the company. Then, divide the sum by the number of employees.
New hires compared to workforce is how many new employees are at the client’s business. A large percentage of new hires can be a sign of high turnover, unless the client’s business has recently grown. To calculate new hires compared to workforce, divide the number of new hires by the number of total employees.
Employee turnover is the percentage of employees who leave your client’s business. You can measure involuntary, voluntary, or total departures. To find the turnover rate, divide the number of employees who left by the total number of employees.
Retention rate is the opposite of employee turnover. It shows how many employees stay with your client. To find the retention rate, divide the current number of employees by the number of employees at the start of the designated period.
How to calculate the cost of employee turnover?
Many aspects affect the cost of turnover. Each employee offers unique value, so the calculation of staff turnover is not as simple as counting dollars in and dollars out.
To help your client find the average cost of employee turnover, separate expenses into categories:
- Pre-departure costs
- Vacancy costs
- Hiring costs (cost per hire)
- Orientation and training costs
First, find the pre-departure costs, including the former employee’s salary and benefits.
Then, review the vacancy costs by noting the number of days it takes to fill the position and the cost to cover the position’s tasks.
Next, show the hiring costs, including HR salaries, recruiter fees, job advertisements, screenings and interviews, background checks, and travel.
Finally, look at the cost of onboarding a new employee. Also, take loss of productivity into account. When employees are first hired, they are less productive because they need to get familiar with the business.
The cost of losing an employee can be up to two times an employee’s yearly salary. Show your clients how much employee turnover costs and how you can reduce their turnover rates.