What is the Real Cost of Employee Turnover?

What is the Real Cost of Employee Turnover?

While cost is an important factor to consider when deciding which background checks to conduct, the price may be much higher without them. Background checks create a safer workplace, assist in hiring the most qualified candidates, reduce employee theft and mitigate the risks associated with negligent hiring.

In an article by Josh Bersin he outlined factors a business should consider in calculating the "real" cost of losing an employee. These factors include:

• ·         The cost of hiring a new employee including the advertising, interviewing, screening, and hiring.
• ·         Cost of on-boarding a new person including training and management time.
• ·         Lost productivity... it may take a new employee 1-2 years to reach the productivity of an existing person.
• ·         Lost engagement... other employees who see high turnover tend to disengage and lose productivity.
• ·         Training cost. For example, over 2-3 years a business likely invests 10-20% of an employee's salary or more in training 

What’s that cost?

Some studies (such as SHMR) predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $40,000 a year, that's $20,000 to $30,000 in recruiting and training expenses

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But others predict the cost is even more - that losing a salaried employee can cost as much as 2x their annual salary, especially for a high-earner or executive level employee.

Turnover seems to vary by wage and role of employee. For example, a CAP study found average costs to replace an employee are:

• ·         16% of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328.
• ·         20% of annual salary for mid-range positions (earning $30,000 to $50,000 a year). For example, the cost to replace a $40k manager would be $8,000.
• ·         Up to 213% of annual salary for highly educated executive positions. For example, the cost to replace a $100k CEO is $213,000.

The bottom line is although there are costs associated with conducting professional employee background search the benefits outweigh the cost of employee turnover.

Why Do Employeers Really Drug Screen

Why do employers drug test?  Safety is often the main reason for employee drug testing. Organizations that require employees to operate machinery, drive, work with consumers or do manual labor often require drug testing for the safety of everyone involved. Pre-employment and random drug testing is administered to protect employees, as well as the general public to ensure consumers are confident that employees are working.

There are five primary types of drug tests: urine, blood, hair, saliva, and sweat. Most common is the urine test which has the benefit of being inexpensive and less intrusive than the blood test.

Employers do have a right to do randomized drug testing on a regularly scheduled basis (or under the premise of reasonable suspicion). Employers may also request a drug screen within a short window so the applicant is unprepared to cheat the test.