• 07/03/2022
• By wizewebsite
• 630 Views

Employee turnover represents a high cost for companies. How to reduce them?<

Introduction: what is employee turnover

The term fluctuation comes from the Latin word fluctuare, whose meaning is to move here and there. The inflow and outflow of employees in companies can thus be considered as fluctuations. In other words, turnover shows companies how many employees have changed in a given period. Fluctuation can be desirable as well as undesirable as well as voluntary and involuntary. If your company has zero turnover, this may not be a desirable phenomenon, because the arrival of new employees is often associated with new ideas that can move your company forward.

How is employee turnover calculated?

Employee turnover can be calculated in several ways. For example, if you want to get a percentage fluctuation, you can add up the number of departures, divide it by the total number of employees, and multiply the resulting number by one hundred.

For example, if your company has 100 employees and 10 of them leave the company during the year, the annual turnover rate in your company will be 10%. Keep in mind, however, that employee retirement, maternity leave, or departures of employees who have only been hired for a fixed period of time are not included in the turnover rate.

So what is the healthy rate of fluctuation?

According to experts, fluctuations ranging between 5 and 7% are considered optimal. However, such low figures are not very realistic at a time of economic growth, so that between 10 and 15% is currently considered a healthy fluctuation rate. However, even this number may not be meaningful enough and it is good to focus on several factors. For example, if you have a low turnover rate, but highly qualified professionals leave you, which is very difficult to replace, it can have a very negative effect on the operation of your company.

Current situation in the Czech Republic

The latest data from the Czech Statistical Office show that there is a decline in the pandemic in the labor market. Jobs are rising and the number of unemployed is falling, but companies are struggling to find suitable staff for a large number of positions.

The supply of labor significantly exceeds the demand for it, according to current data, more than 355,000 vacancies are available. While at the beginning of the year, employers experienced a high rate of turnover, especially in the pandemics most affected (gastronomy, hospitality), it now appears that people remain in fear for the coronavirus situation. It is therefore more difficult for companies to "pull" employees from other companies together. However, according to experts, this situation may soon change.

The highest fluctuations are mainly in production positions, positions with lower wages, highly sought-after positions and also in positions where younger employees with short experience are employed.

The turnover rate is high, especially for young employees.

Causes of employee turnover

What are the most common causes of employee turnover? First of all, low wages followed by lack of motivation, low loyalty, unsatisfactory management and lack of professional growth. In 2020, the rate of fluctuation in the Czech Republic was fundamentally affected by the coronavirus pandemic, when most employees were forced to fluctuate involuntarily.

Employees most often leave the company during the probationary period and also during the first year of employment. Statistics show that up to 65% of workers leave their jobs within one year of taking up employment. The lowest turnover rate is associated with employees over 50, while the highest is associated with employees under 30, for whom the risk of turnover is up to five times higher than for employees over 40.

What are the risks of employee turnover?

As we outlined above, a certain level of turnover can be beneficial for companies, but when the rate of fluctuation is high, it is likely to have a negative impact on the company's financial results. The high turnover rate is also associated with the loss of the company's know-how, low employee motivation and high recruitment costs. Let's take a closer look at the negative effects of fluctuation.

Loss of know-how

The departure of an employee is associated with the loss of his knowledge know-how, if companies lose this knowledge, they will also lose their competitive advantage. If it is an employee who has worked for the company for a long time, the company also loses a lot of non-transferable experience. In addition, some employees may relocate some customers to their new locations, and customers may also fall in love with the company due to labor shortages.

Employee turnover carries a number of costs, such as work clothes. Source: Lindströmgroup.com

Staff recruitment and training costs

High turnover is inextricably linked to the cost of recruiting and training new staff. Costs range from CZK 20,000 upwards, in the case of highly specialized professions they can climb to hundreds of thousands of crowns.

For example, if a large manufacturing company with thousands of employees has a very high turnover rate, the monthly costs of recruiting and training new employees can be around one million crowns. In addition, the average time taken for a new employee to reach the same productivity as a permanent employee is around two years.

Administrative costs

There are also administrative costs associated with fluctuations related to, for example, deletions from wage systems, costs of responding to job applications, costs associated with reporting to the authorities and the like.

Material costs

The total cost of turnover has a number of other items, one of which is material costs. These are, for example, materials needed for training or clothing for employees.

How to prevent fluctuation?

Reducing unwanted fluctuations can therefore bring you considerable savings. How can companies prevent turnover?

Employee benefits

Due to the fact that an adequate salary is still very important for the satisfaction of employees in the company, it is necessary to have a well-established remuneration policy in the company. Employees can be motivated not only by a higher salary, but also by offering benefits such as meal vouchers, training courses, extra holidays or a company car.

Open and direct communication

One way to keep employees is open and direct communication. Employees appreciate when management listens to their needs and set aside time for individual meetings. It is also necessary to pay attention to the overall atmosphere in the company. It is proven that a good atmosphere contributes not only to higher satisfaction, but also to higher employee productivity.

Quality and comfortable clothing and working environment

Work clothes for employees in a uniform style or work uniforms bring entrepreneurs a number of benefits and are a business card for their companies. However, employees will also appreciate being able to work in quality, comfortable and safe work clothes.

Work clothes in the food industry must meet strict hygiene standards. Source: Lindströmgroup.com

How to reduce fluctuation costs

However, a certain degree of employee turnover cannot be avoided. The way to reduce costs in the event of fluctuations is the outsourcing of various services, which will not only reduce costs for the company, but also increase the quality of services, and also allow management to focus on key activities of the company.

Reuse of rented corporate clothing

You can therefore reduce fluctuation costs, for example, by renting work and protective clothing, such as work trousers, overalls, work sweatshirts, jackets, overalls, coats and more. Lindström will regularly pick up and wash work clothes and replace them with new ones in the event of wear.

Workwear outsourcing is associated with a number of benefits for large companies and small entrepreneurs. The key advantage is that the company does not have to count on fixed costs, but only pays for directly delivered services. Work clothes for specific industries, such as the food industry or healthcare, will always meet the prescribed hygiene standards. However, by renting clothes for employees, companies will not only save money, but also the time they would have to devote to caring for clothes.