Save on Staff Costs

Save on Staff Costs

Employee turnover has some obvious costs associated with it, including recruitment, training and salary. However, every time an employee leaves, there are a variety of hidden costs you might not have considered.

The cost of churn

While you might not be writing a cheque for these costs, here is how staff turnover can drain rands:

  • Slippage. When an employee is missing, the work that isn’t getting done has a price attached to it. Lost sales, production delays and lags in new product introductions all cost your company money.
  • Ripple effect. Turnover has an impact on the peer group, as well as the management chain, making everyone less effective. Co-workers need to pick up the slack, distracting them from achieving their own performance goals while managers need to devote time to finding a new employee.
  • Customer loss. When a knowledgeable employee leaves, taking experience and customer service ability with him or her, that can have an impact on customer satisfaction. Customer commitments are suddenly not being met, and the company loses important customers. Dealing with trainees can be challenging. If you have a lot of unwanted turnover, customers can get annoyed or begin to lose interest in your business.
  • Lost credibility. Turnover is a cost to management in two ways: Management can lose credibility when it creates an environment with excessive turnover, and existing employees can become demoralised and decide to move on.

Invest now, save later

It’s important for SMEs in particular to work on creating environments that retain employees. Too often, SME owners don’t consider how important it is to invest time and resources into their employees. Either way, you pay.

Gwen Moran

Gwen Moran

Gwen Moran is co-author of The Complete Idiot's Guide to Business Plans.