What is the real cost of attrition of employees?

by Finn Patraic

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What Is The Real Cost Of Employee Attrition

Explore the cost of attrition of employees for companies

The attrition of employees refers to the phenomenon of employees leaving their business for reasons ranging from voluntary resignation or retirement to the dismissal initiated by the company. What distinguishes the attrition of employees from employee turnover is that it leads to a reduction in the size of the workforce. This is due to the fact that, contrary to the turnover of employees, where outings are offset with new hires, the attrition of employees means that positions are left vacant for a very long time or are fully eliminated. This basic distinction is essential because it affects not only the operation of companies, but also makes the consequences of the attrition of employees much more serious. But what is the real cost of the attrition of employees, and how can you quantify it? Read the rest to explore 5 of the most important consequences that employee attrition can provide your organization.

5 significant consequences of the attrition of employees

1. Decrease in productivity

The loss of an employee, in particular unexpectedly, can considerably affect your company's capacity to maintain its productivity and its levels of efficiency. The sudden departure of a qualified worker leads to the loss of precious knowledge, disrupts the workflow and can affect the dynamics among the remaining members of the team as their workload suddenly increases to fill the gap. At the same time, a precious moment will have to be invested in the recruitment of a new employee, by tearing further the attention of leadership and the critical task staff to find a new balance. Consequently, if your business works with limited resources, the calendar to find a replacement is more likely to last longer, because the maintenance of a recruitment strategy is not an absolute priority.

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2. Professional exhaustion

Since the main characteristic of employee attrition is that any vacant position takes a long time to be completed, the schedules of other staff members remain occupied for an equal period. This may have a negative impact on morale and employee engagement, as employees are forced to assume new responsibilities for which they cannot even be trained. The longer this situation continues, the more the employees are frustrated, often leading to missed work days and a decrease in productivity. To put this in number, Gallup estimated that a disengaged employee can cost their company 34% of their annual salary over a period of one year. This is a significant cost that can only increase when the attrition of employees is not effectively treated.

3. Internal knowledge loss

The actual cost of the attrition of employees often extends beyond the expenses associated with the hiring of a replacement, although these costs are also significant. Companies are mainly suffering from internal or “tribal” loss of knowledge. This term encompasses the information, skills and informal knowledge which is essential for successful responsibilities of a specific role. Research indicates that 42% of this expertise is known only to the individual currently occupying this post. More worrying, this knowledge is often undocumented, even in well -organized companies, because employees gradually acquire it and share it mainly verbally. Consequently, when an employee leaves, he takes with them this richness of information, leaving the company in the difficult, if not impossible position, rebuilding it from zero to obtain satisfactory results.

4. Resources linked to the hiring of a replacement

As we mentioned earlier, a key characteristic of employee attrition is that vacant positions often remain unpaid. However, this does not happen because companies do not want to find a replacement, but rather because of challenges related to the search for good talents, the publication of inadequate work descriptions or a limited time for recruitment efforts. Consequently, the hiring process is extended, which represents a large part of the cost of attrition of employees. It is estimated that the replacement of an employee can cost anywhere 50% to 400% of their annual salaryDepending on their level and global productivity. For example, replacing an employee with a salary of $ 60,000 can cost between $ 30,000 and $ 150,000. These costs can easily add up when you are considering recruitment agency fees, job advertisements, the hours that managers spend on recruitment and loss of income after a drop in productivity.

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5. Midire training and costs

If you manage to withdraw from the long recruitment and hiring process, your work and the costs reported by high attrition rates of employees are not completed. Now you have a new employee who must be integrated into his new working environment and trained to excel in their new role. The tasks associated with these processes are expensive and long, requiring significant time commitment from management and current employees. Something that you cannot ignore is the additional risk of making bad job decisions, especially in the event of increased pressure to fulfill a role quickly in order to restore the workflow of the company. In this case, you will find yourself in the particularly unhappy position of having to repeat these steps, by multiplying the expenses that we have just mentioned.

Conclusion

The attrition of employees is a problem that companies must keep a trace to assess their capacity not only to keep current employees, but also to successfully replace those who leave one or not on their own will. Although the loss of some employees is natural and should not worry you, high attrition rates can indicate a drop in labor and a company that loses the resources it needs to grow and adapt to market development needs. Paying attention to this metric will help you understand the real cost of the attrition of employees and to take the necessary measures to prevent its negative effects on productivity, the efficiency of your organization, morale of employeesand overall profitability.

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