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The Cost of Employee Turnover

Business owners are acutely aware of the costs of employee turnover.

Turnover occurs when a position becomes vacant and impacts both direct and indirect costs. Direct costs are obvious. These include the cost of recruiting, training, and reduced productivity common among new workers. Indirect costs also impact the bottom line. In direct costs include lost opportunitysuch as the inability of a vacant position to generate new business as well asthe impact on the remaining employees through reduced morale and inefficiencies.

Successful businesses usually benchmark their turnover rates in an attempt to reduce costs. Turnover rates do vary by industry. The Bureau of Labor Statistics reports quarterly data for non-farm employment turnover rates by industry. We tend to think of manufacturing jobs as being unstable, however, compared the turnover for professional (4.8%) and Leisure and Hospitality (5.5%) the turnover rate for manufacturing is a mere 2.2%. It should be no surprise that the turnover rate among all government sectors is less than 1.5%. Of course, these are industry estimates. Turnover rates among individual companies are known to range between 20-70% under some circumstances.

Employee turnover impacts the skill distribution of the businesses workforce. To a certain extent, longevity leads to improved profitability as more experienced workers tend to be more productive. There are exceptions, particularly among unskilled occupations where the learning curve is comparatively short.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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