We previously posted about extra costs associated with current employees. That post may have been sobering, but don’t go stiffing all of your workers to make up for it. The cost to replace employees if they leave is all but guaranteed to exceed the cost to keep them. Studies have shown that replacing employees can cost as little as a third and as much as one and one half times their annual salary in acquisition and training costs. Although the costs don’t always appear obvious, like writing a check for rent, they are very real and can (and do) cut deeply into your bottom line. Some areas that add to the expense of employee turnover are:
Exit Costs
For whatever reason the employee turnover has occurred, you can expect there to be expenses that arise with their departure: the exit interview, paperwork, severance pay, any outplacement fees and in some situations even litigation fees. Aside from these more concrete expenses, you can also say goodbye to all of the years of education and experience, as well as the training hours that particular employee soaked up. Unfortunately, your dealership may also lose some customers who had a relationship with that specific employee.
Pulling the weight
Often following an employee termination, remaining employees are stretched thin in an effort to get their job done, as well as cover the responsibilities of the person who left. This can result in overtime and decreased productivity overall, often leading to lost opportunities. Employee morale is sure to suffer due to the extra workload and emotional attachments to the severed employee. The overtime segment will be easy to calculate, however you may never find out about the lost opportunities or be able to calculate the exact amount of productivity decrease.
Recruitment Costs
Now that you’re a man down, you’re most likely going to have to find someone qualified to replace them which involves time and money spent on help wanted ads, reading and reviewing resumes, scheduling and performing interviews.
Replacement Costs
Once you’ve chosen a candidate, there are yet again more costs such as background checks, drug screens, HR Processing, orientation and training costs. Depending on your process, training can become a large expense when you take into account the time of every employee involved. You’ll want to make sure the new employee gets up-to-speed on your kitchen sales process to avoid mistakes, which are another expense. Mistakes are bound to happen with a new employee, but hopefully you’ve hired the best person for the job so that the time and money spent will be worth it in the end.
As you can see, it is extremely important to hold on to the good employees you have. You’ve invested a lot of time and money into them and they work hard for you. Make them feel appreciated, and if issues arise, the cost to repair the damaged morale of a currently valuable employee will most likely be a lot less than the cost of finding a new one.
