The Hidden Costs of Poor Employee Retention

Customer service often struggles as an industry in employee retention. Customer service work is stressful, keeping employees happy is a key role of customer service managers. I recently read a great article on the costs of poor employee retention by Joy Huber, that I’d like to share. I though that Joy did an excellent job at demonstrating the costs associated with poor employee retention in the work place, especially those of us in the customer service industry. I’m happy to have Joy Huber guest post today on the Costs of Poor Employee Retention and What to Do About It.

50%-200% of Employee Salary is the Hidden Cost of Poor Retention

As I conducted extensive online research it yielded a varying estimate on the exact cost of employee turn-over. According to hrtutor online, “It costs approximately $50,000 to replace a $50,000 a year worker. The more the employee earns, the greater the expense of replacement. Replacing an executive can cost two to three times their annual salary.” The small business information section of about online states, “A general approach to calculate employee turnover cost is to use 50% to 200% of an employee’s annual salary.

To me and anyone in business the main point is clear quickly; turn-over is a hidden cost to businesses and in order for businesses to be as profitable as possible (especially in today’s “sluggish economy”), it’s critical to invest in minimizing costs!

Any company facing involuntary employee turn-over and experiencing a challenge with employee retention is losing money completely unnecessarily and not operating as profitably as it could. Does your company have an employee retention goal? Clearly defined, one that every personnel manager or supervisor in the organization is clear on and could recite back? Are personnel managers evaluated in their reviews and raises/bonuses based on meeting this employee retention goal? What’s the strategy or how behind accomplishing this goal?

Here’s why you need an employee retention goal and employee retention strategy:

Calculate the high cost of poor employee retention.

Recruitment + acclimation to job/industry/corporate culture = total cost of employee.

- What was the time taken in the employee recruitment process (Human Resources, the person’s manager, perhaps others who have to update job descriptions, screen letters of application & resumes, and conduct interviews)
- What were the costs to advertise the position? How do you let potential employees know you’re seeking talent? Ads, commercials, Job Fairs, Staffing Agency, etc.
- Did you incur costs for temporary staff
- Did you experience loss of customers or relationships - Ever had someone leave and take your customers with them? Ouch!
- Did your service levels suffer because of reduced staffing numbers?
- Did your staff experience added stress, increasing their chances of turn over, or increase their job disastifaction?

All of these factors, not even just the costs associated with the replacement of the employee affect your business’s bottom line. These are hidden costs to poor employee retention programs in an organization. Luckily, we can overcome these costs with careful planning, and playing an active role in decreasing employee turn over and increasing the level of employee engagement and employee retention.

Reduce Employee Turn Over Through Engagement & Retention

When Human Resources, hiring managers, and customer service managers and supervisors are trained on how to recruit the right employees and trained on how to appropriately manage the intellectual capital (a.k.a. keeping people engaged, active in roles, improves employee retention) in an organization, these groups together, can significantly reduce employee turn-over and make a significant positive impact on a healthier bottom line for the company!

Joy Huber - “Ms. En’Joy’able”
Award-Winning Speaker & Business Communications Expert - Communications & Employee Retention Expert

For more great information check-out my CD Programs
Retaining Super Stars for Super Teams” and
Talk to the Hand: A Woman’s Guide to Truly Thriving Amongst Difficult People” at

Or email me at: [email protected]

Thanks Joy for an awesome outlook on why employee retention matters and how we should consider the true cost of retention to our organization’s bottom line.

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