Employee turnover is more than just a challenge—it's a significant cost to businesses that often goes uncalculated. While many companies focus on the expenses associated with recruiting and training new hires, the true cost of losing an employee is far more complex. For businesses in the construction industry, where expertise and experience are critical, understanding and addressing these costs is essential.
Replacing an employee isn’t just about hiring a new one; it's about the total cost involved in the process. In the U.S., businesses spend between 50% to 60% of an employee’s annual salary to find a replacement. In some cases, this can even reach up to 200%. The situation is no different in New Zealand, where employee turnover has cost businesses a staggering $3.8 billion over a 12-month period.
These numbers underline a critical point: high employee turnover is an expensive problem that spans industries. From lost productivity to the impact on company culture, the hidden costs of turnover can significantly affect a business’s bottom line.
Understanding why employees leave is crucial in mitigating turnover. Studies show that the first 45 days of employment are the most critical, with up to 20% of new hires leaving during this period. The reasons for this early departure are varied:
Even beyond the initial phase, turnover remains a risk, with nearly a quarter of new employees leaving within their first year. This highlights the importance of consistent and long-term engagement from both HR and management.
The costs associated with turnover can be categorized into six main areas:
Reducing turnover begins with recognizing its full cost. By aligning turnover issues with business metrics, companies can better understand the impact and take action.
Step 1: Awareness and Alignment
Educate your team about the costs of turnover and ensure that these are tied to real business metrics. This will foster a sense of responsibility to hire well and retain employees.
Step 2: Build a Strong Onboarding Program
An effective onboarding program is key to employee retention. Make sure new hires feel welcomed and supported from the moment they sign their contract through their first six months.
Step 3: Innovate and Automate
Consider implementing an automated onboarding process to streamline administration and ensure consistency in how new employees are integrated into your organization.
Step 4. Exit Interviews Seek to understand why employees are leaving your business, collate the data and look for common themes, address any issues to reduce staff turnover.
By focusing on these areas, you can mitigate the hidden costs of employee turnover, creating a more stable and productive workforce.
Have you seen our Ultimate Recruitment Guide?
Data Source: https://action.deloitte.com/
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