Making Your Business Better

Employee Turnover Rate: What It Is, Why It Is Important, And How To Reduce It

Posted by on 8-08-15 in Uncategorized | Comments Off on Employee Turnover Rate: What It Is, Why It Is Important, And How To Reduce It

When your company loses an employee and has to replace him or her, it creates problems. This is referred to as employee turnover rate, and it is something that can really affect your business. Having a good and effective hiring process in place is a great way to lower this rate, but it’s also important to understand the negative effects of a high employee turnover rate. Here are three things you should know about employee turnover rates. What Is It? Employee turnover rate is a ratio you can measure by dividing the total number of employees you lost during a period by the total number of employees you had at the beginning of the period. For example, if you lost and replaced 5 employees last year and had 50 employees to start with, your turnover rate for the year would be 10%. Aiming for a low turnover rate is critical for the profitability of your company What Problems Does This Create? Each time you replace an employee, your company will suffer in several ways. Here are some of the negative effects high employee turnover rates cause: Costs – It costs money to replace an employee. This amount varies; however, it could cost as much as 60% of the former employee’s salary to replace him or her with a new worker. These extra costs cover training the new employee, and they cover lost income due to a missing or inexperienced worker. The costs also cover expenses for advertising and other things. Time – When employees leave your business, you will have to advertise, analyze, and interview applicants. This process can take a lot of time, but it must be done properly in order to find the best worker for the position. Productivity – Employees tend to get better at completing tasks after they thoroughly learn and understand their jobs, which is why replacing employees affects the productivity of your business. To prevent these problems, you may want to look for ways to reduce your employee turnover rate. How Can You Reduce Employee Turnover Rate? If you can find the right employees and keep them, you will not only reduce the turnover rate, but you may also see an increase in your company’s productivity and profits. You might be able to do this by following these tips: Hire the right employees the first time – Spending enough time on the hiring process is a great way to weed out applicants and find the right ones. A great way to do this is to hire an employment screening company. This type of company will handle the entire screening process for you, and it could help you find the best employees for your openings. Keep your employees happy – Once you do have the right employees, you may need to work hard to keep them. You can do this by giving them annual raises and good benefits. Paying your employees a little more each year may reduce the turnover rate, and this may actually be cheaper than replacing the workers. Promote from within – If an employee does leave or if your company creates additional jobs, you may want to promote current employees to higher positions. These employees will already know the system and your business, and it may be better to hire...

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