Emplicity's Corporate Blog

Company and industry News

Dear Boss, I Quit: The High Cost of Turnover

Posted by: on January 31, 2018 in employee relations Human Resources Recruiting


imageAre you prepared to lose employees in 2018? A new survey was recently released by Glassdoor, revealing that 35 percent of hiring decision makers (individuals working in recruitment and HR and responsible for hiring) are expecting more employees to quit over the next 12 months. This survey, conducted among 750 hiring decision makers, also reports that nearly half (45%) of respondents noted that the top reason for employees changing jobs is salary, followed by career advancement opportunities, benefits, and location.

Employee turnover creates a substantial expense for businesses, and the actual cost can vary depending on the wage and role of the employee in question. A study from the Center for American Progress (CAP) breaks down the average costs to replace an employee as follows:
  • 16 percent of the employee’s annual salary for high-turnover and low paying positions, earning under $30,000 a year. For instance, to replace a $10/hour fast food worker it would cost the employer an additional $3,328.
  • 20 percent of an employee’s annual salary for midrange positions - those earning $30,000 to $50,000 a year. In this example, the cost to replace a retail store manager making $49,000 per year would be $9,800.
  • For executive positions, it can cost the employer up to 213% of the executive’s annual salary to replace them. For example, a CFO earning $150,000 per year would cost $319,500 to replace.
Two-thirds of Glassdoor’s survey respondents believed that their organization was either satisfactory or even very satisfactory at clearly setting pay and benefit expectations within job postings, yet Glassdoor data shows that fewer than one out of every 10 online job listings include pay data in the job description. Many hiring decision makers believe that some turnover could be avoided if job candidates were better informed about how their pay and career could progress during the initial job search and recruiting process. Having that information on hand early on in the hiring process could help job candidates decide with more certainty whether the job is a good fit for them or not.

Commenting on the study, Carmel Galvin, Chief Human Resources Officer at Glassdoor said, "Recruiters and hiring managers need to manage expectations and use all channels available to them to communicate with potential candidates to ensure pay realities meet expectations. It shouldn't be a battle for job seekers to gain insights into salaries, benefits, culture and what their career path might look like in a job." Galvin also added, "There is almost always going to be a rival firm that could potentially pay your best people more, but Glassdoor research and other third party studies confirm that company culture matters more than pay as a driver of long-term employee satisfaction and engagement. If you can improve your workplace culture and offer people career advancement opportunities, this will help you hold on to people longer."

According to Brandy Burbridge, Director of Recruiting at Emplicity, employers can even attempt to get in front of employee turnover and prevent it from happening. Using the estimate that a company’s team of 10 mid-level employees will cost $10,000 each to replace, the employer could assume that they might spend over $100,000 during the next year in turnover costs. Rather than being resigned to losing that revenue to employee replacement, a proactive employer can invest in offering additional employee benefits, merit or tenure based raises, seasonal or performance bonuses, and other opportunities for additional compensation to boost morale.

Emplicity understands that HR Outsourcing should be simple and meaningful. As a Professional Employer Organization (PEO), we strive to be a great partner in supporting your business. If you would like to request more information on how we can assist your needs, please reach out to us at 877-476-2339. We are located in California – Orange County, Los Angeles, and the greater Sacramento and San Francisco area.

NOTICE: Emplicity provides HR advice and recommendations. Information provided by Emplicity is not intended as a substitute for employment law counsel. At no time will Emplicity have the authority or right to make decisions on behalf of their clients.