August 28th, 2014 by Corrie Johnson
Does your company experience high employee turnover? If so, you’re losing money. Hoopla helps reduce employee turnover with fun sales contests, games and challenges that foster friendly competition in the workplace.
According to this article on Forbes.com, the average person stays at a job for about four years. However, 91% of Millennials—the fastest growing segment in today’s sales force—expect to stay in a job for only about half that time. Over the course of a 50-year career, most people will have 15 – 20 jobs, according to CustomerThink.com. This means that many employees are unhappy or become dissatisfied enough to leave shortly after settling into a new position.
What costs are associated with employee turnover?
Many companies fail to understand the true cost savings associated with reducing employee turnover. The Society for Human Resource Management (SHRM) estimates that it costs $3,500 to replace one employee who is paid $8 an hour. Their estimate was the lowest of 17 companies who estimated the cost of employee turnover, according to WebProNews.com. Many companies simply do not realize how much each lost employee costs them in recruiting, training and other expenditures.
Companies that endeavor to create a positive work environment and address employee concerns are likely to experience lower turnover rates, which results in significant savings. Keeping employees happy not only saves companies money that would otherwise go to recruiting and training new staff, it also means that companies can retain the most talented employees, which, in turn, attracts more stellar employees.
Salaried employees may cost even more to replace. Some estimates say that it costs a company 30 to 50 percent of entry-level employees’ salaries to replace them, 150 percent of mid-level employees’ salaries and as much as 400 percent of high-level employees’ salaries. To put this in perspective, a company with 1,000 employees and a turnover rate of 10 percent will spend around $7.5 million for employee turnover each year, according to ISquare.com.
Although these figures may sound high, they make sense once companies take a close look at the figures. When an employee quits, someone must be hired to temporarily come in and fill that position, which costs money. Also, it takes new hires a while to become efficient workers, so there is lost productivity up until the time that a new hire becomes equally good at their job as the former employee.
Sales revenue may be lost as well. Customers may also feel more comfortable with the people they have dealt with in the past and sometimes choose to follow employees to their new companies.
Another expense is the cost of exit interviews. Someone has to be paid to perform exit interviews. Plus, there are administrative costs associated with stopping payroll, notifying COBRA and filling out other forms when employees leave.
Companies lose the money they’ve invested in employees. This includes internal and external training, plus the cost of possible licenses and certifications. New hires must be trained as well, so all of those costs are directly related to employee turnover. Not only must companies pay people to conduct training, they also have to foot the bill for orientation and training materials.
Unemployment insurance premiums may go up. In the case of unemployment hearings, someone has to be paid to prepare for them, or the company must pay a third party to handle them.
To fill vacant positions, companies must pay for recruitment. These expenses may include advertising and hiring a recruiter to perform interviews, run background checks, and communicate with candidates. An internal recruiter may spend 30 to 100 hours or more per position. An additional 20 hours from an assistant to the recruiter could be necessary, too, which drives up costs.
Some employee turnover is unavoidable. However, companies can counter most of it by performing an assessment of which employees are leaving and why. Exit interviews can be tremendously helpful in ascertaining why people quit. Once the reasons are known, steps can be taken to fix the problems that drive employees away.
According to UnicornHRO.com, 53 percent of employees look for a new job because they want better benefits. Thirty-five percent said their current company was not providing career development. Companies can address these concerns with simple fixes, such as offering better benefits packages and additional training opportunities. More training can also increase the productivity of current employees. Hoopla can help companies to ensure that their employees feel excited about their jobs and feel like they are constantly learning new things, which prevents loss of talented employees.
Overall, keeping employees motivated and happy translates to increased productivity and less turnover. A company enjoys a desirable environment and favorable reputation under these circumstances, which attracts top talent. This cycle repeats as happier and better employees continually improve the company’s reputation as a top employer, and more people want to work there.
How does Hoopla reduce employee turnover?
At Hoopla, we fully understand the importance of employee retention. Hoopla helps companies keep their employees happy by making the workplace more fun, facilitating teamwork and increasing sales productivity through our Sales Motivation Platform. For a real-life example, download our case study to learn how 6S Marketing has been using our software to create an engaged, winning team culture.