How important is it to have happy employees? Turns out, pretty important.

A happy employee goes a long way. Not only is an employee likely to perform well if they like their job, but if employees are happy, they are likely going to stick around. Why does this matter?

 

It matters because preventing high employee turnover rates is a necessity for a successful company.

A happy employee goes a long way. Not only is an employee likely to perform well if they like their job, but if employees are happy, they are likely going to stick around. Why does this matter? 

 

It matters because preventing high employee turnover rates is a necessity for a successful company.

According to the Center for American Progress, for all positions except those with very specific skills, the average cost of turnover was twenty-one percent of an employee’s annual salary. Yes, you read that correctly. 

 

Twenty-one percent of an employee’s annual salary. Let’s break down the costs associated with this outlandish claim.

There are direct and indirect costs associated with this figure. First, there are direct costs. These are costs that hit your pocket immediately such as:

  • Overtime for employees covering shifts or temp employees
  • Exit costs such as severance, unemployment taxes, and exit interviews
  • Hiring fees which can include recruiting fees, physicals and or drug tests, interviews, applicant tracking systems, background checks, recruitment bonuses, referral bonuses, and travel costs
  • Onboarding costs like training, certificates, hardware and technology service

Additionally, there are indirect costs which can be just as bad if not more costly than direct costs. These can include:

  • Decreased morale
  • Lost productivity due to loss of headcount
  • Reassigning work to other employees
  • Managerial burdens like exit interviews and succession planning
  • New hire ramping costs such as poor quality of work due to a lack of industry knowledge and errors Lost clients due to relationships
  • Educational loss of institutional knowledge

To make your business as efficient and as profitable as possible, you have to prevent high employee turnover rates. In order to do this, there is something you can do. And you can do it right now. Give your employees the recognition they want and deserve. When an employee does something right and they are recognized for doing so, not only will it reinforce the production of quality work product, but it will make them happy. Happy people don’t quit their jobs, and that’s a fact.

 

Boushey, H (2012, November 16)”There are Significant Business Costs for Replacing Employees”