For instance, the direct replacement costs of a nonunion supermarket cashier averaged $736 in 2000, but this number jumped to $1,550 when factoring in indirect costs. supermarket industry finds that when accounting for opportunity or indirect costs of an employee leaving (such as paperwork errors or the loss of customers due to a decline in the quality of service), per-employee turnover costs more than doubled. Because these positions tend to pay low wages, provide few benefits, and expose workers to injuries, that year’s high turnover is estimated to have cost service-providing companies in Iowa almost $200 million in direct expenses alone.Īnd turnover also has indirect, less-easy-to-observe costs. Consider the analysis of Iowa’s direct care professionals-home health aides, nurse assistants, and patient care technicians-that shows paying overtime to make up for the loss of capacity while a position is vacant, recruiting, and training a new hire amounted to $4,026 per worker in 2013. Studies that estimate the cost of losing and replacing a worker generally takes into account direct expenses such as the resources that go into advertising an open position, interviewing and screening candidates, and onboarding a recently hired worker. Yet many businesses do not know or underestimate the toll that high turnover has on their workforce, their sales, and their bottom lines. Because jobs in high-turnover industries and occupations are associated with low wages and lack of access to employer-provided benefits, the rate at which employees leave and are replaced has important implications for both workers and employers. These costs can amount to big financial losses. businesses revenues and profitsįor businesses, the cost of losing and replacing a worker goes well beyond the cost of a new hire. These policy solutions include increasing earnings with policy tools such as minimum wages, giving workers a voice in their workplaces, and enforcing anti-discrimination protections so that no worker feels stuck between a hostile workplace and unemployment. And employers are less likely to risk losing good workers when they search for the benefits needed to improve their well-being. Raising the floor on job quality sorts workers into jobs for which they are best matched. The research on employee turnover also points us to the solutions. The costs of turnover range from 2 percent to almost 150 percent and vary across industries, but the sum of this research demonstrates the case for providing better jobs in the first place. We present the evidence that there is a dollar value to replace a worker and get the next hire up to speed, which could be deferred by keeping those workers in their jobs if it is an otherwise good fit for their skills and passions. This issue brief reviews the economic literature on the cost of employee turnover. labor standards and the quality of jobs to reduce the costs of employee turnover to U.S.
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