Your Employee Turnover Crash Course
A solid understanding of employee turnover is necessary for cutting it. Here’s a quick guide to understanding why your employees are actually leaving.
So, what is employee turnover?
Employee turnover is the rate at which employees leave a company and are replaced by new employees (Cambridge Dictionary). “Turnover” is synonymous with the term “churn.” The converse — employee retention — is the rate at which existing employees remain at a company.
What is frontline employee turnover?
A frontline employee is a worker who deals directly with customers or who is directly involved in making a product (Cambridge Dictionary). Therefore, frontline employee turnover occurs among employees who work in sectors like warehousing, logistics, retail, manufacturing, transportation, food services, and construction.
Why does it matter?
It’s simple. Employee turnover is really, really expensive.
Overall, the total cost of replacing a frontline worker ranges between $2,000 and $15,000.
It can’t be that expensive… right?
At face value, that estimate can be hard to believe. Yet, several reputable estimates confirm the extensive costs of turnover. Here are some of the leading estimates:
- 16% of annual salary for high-turnover employees earning under $30,000 per year (Center for American Progress).
- $2,000 per employee for blue-collar and manual labor workers (University of California Berkeley).
- $4,969 per employee in the service industry, according to an industry survey (Society for Human Resources Management).
- $7,000 per employee in the warehousing industry, equal to roughly 25% of salary (Daily Pay).
- $15,000 per employee earning $45,000, substantiated by 240,000 interviews (HR Dive).
Where do those costs come from?
The tangible costs of hiring a new employee — recruiting, onboarding, screening, training — are numerous. However, many of the costs associated with employee turnover are intangible.
Productivity suffers when experienced employees quit. Josh Bersin of Deloitte says that a new hire may need up to two years to reach the productivity of an existing employee. Plus, these new hires are prone to errors, which reduce efficiency and end user satisfaction.
Company culture suffers heavily from high turnover. Professor Ken Moon of the University of Pennsylvania’s Wharton School found that “the interruption to social relationships and workflows” is a leading cost of churn. Similarly, Gallup found that a positive culture is directly related to employee retention and engagement.
What will happen if turnover falls?
Reducing employee turnover increases productivity, fosters relationships, and builds a more positive workplace culture. While cutting turnover definitely saves headaches, improving employee retention can actually increase a business’s bottom line.
The Huffington Post highlighted a case study conducted by Maia Josebachvili, Vice President of People at Greenhouse, which showed that “retaining a sales person for three years instead of two, along with better onboarding and management practices, yields a difference of $1.3 million in net value to the company over a three year period.”
While salespeople have an important role in driving revenue, the central principle of the Greenhouse case study still stands. Keeping employees — especially after investing in recruiting and training — can bring more value to an organization over time, as TLNT reports based on research from Northwestern University.
People — whether managers or frontline workers — are a company’s most valuable assets. The Brookings Institute states that up to “85 percent of a company’s assets are related to intangible capital such as knowledge and human talent.” As an employee spends more time at a company, he or she accrues training, increases expertise, and becomes more valuable.
Companies should make intentional efforts to retain their employees. Productivity, profitability, efficiency, and a more positive workplace follow employee retention.
Download our Frontline Employee Retention Handbook to learn more!
