Currently, high employee turnover rate is a major problem which organizations face. This leads to major failures in the organizational structure of any company. It is extremely difficult for managers to select good employees but it is even more difficult to retain such a workforce. This paper identifies some of the major reasons why employees leave an organization. It is very important for managers to understand these reasons. Moreover, this project discusses the possible steps which employers and managers can take to curb down a high rate of employee turnover.
The United States Dept. of Labor reports that the expenses incurred by an organization during the overall replacement procedure of an employee add up to almost one-third of the new employee’s yearly income. Another formula estimates the direct expenses incurred during this whole procedure as 25% of the yearly salary as well as 25 % of the benefits. Again, these add up to around 30% of the yearly salary. Ironically, these direct expenses do not take into consideration the indirect costs of a high turnover rate.
Although this paper focuses more on high employee turnover rate in the healthcare industry, the causes and consequences of them discussed within this paper are not just limited to any specific industry. Furthermore, the solutions mentioned in within this paper are also applicable in other sectors besides healthcare. In the end, there are a few useful suggestions for employers and managers to assess their organizations and to retain valuable employees. The purpose of this project is to address the steps that an organization can take to reduce the employee turnover rate.
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During this project, special emphasis will be given to the improvements which are required in tuition reimbursement programs and the benefits of educated employees. The objectives of this project are: • to elaborate the causes of high turnover, • to discuss the consequences of high turnover, and • to explain the solutions to tackle high turnover. Section 2. Setting of Problem Organizations that provide healthcare still face the problem of high turnover rates as the need for qualified labor increases.
This is especially true in the patient financial services (PFS) sector. Latest data retrieved from official sources predicts that PFS employers will not be able to enjoy any relief in this matter. “The U. S. Bureau of Labor Statistics (BLS) reports that in February 2000, the median number of years that employees aged 25 to 35 were with their current employers was only 2. 6 years. ” (Gustafson, 2001) A research conducted by BLS in April 2000 revealed that an average person secures 9. 2 employments from the age of 18 to 34 years.
This high turnover rate is an alarming fact due to the amplified expenses associated with replacement of skilled labor. The direct expenses associated with the high turnover of workers include the endeavor and time spent on the process of a worker’s departure from the organization to the selection of new employees. Taking the matter even further, the employer has to train the employee from the relative organization’s viewpoint so that the new employee can fit inside the organizational structure as the departing employee had.
One may argue that these expenses are mostly replacement costs but the expenses incurred at the departure of an employee too may contribute to a significant percentage of the total expenses burned up during the departure and selection procedure. Moreover, the amount and time spent on the training of the departing worker is also taken into account. All these expenses and efforts make it necessary for an organization to use sufficient methods and policies which would ensure a low turnover rate.
The indirect costs of a high turnover rate include factors which have alarming effects on the productivity. The vacancy resulted from the departure of an employee, the extra expenses required to allocate the lingering projects, weakening of the overall morale and self-confidence, and the extra workload produced by the departure of an employee are just some of the many indirect costs that an organization has to bear due to high turnover rates. Even after new workers replace the departing ones, productivity is still slow for a significant period of time.
Experienced workers have the responsibility to guide the newcomers which leads to low productivity from the experienced labor. This can lead to frustration in experienced workers if the situation is mishandled by the management. Senior HR experts state that the productivity level of a new employee is somewhere between 25 and 50% of experienced employees during the first 3 months even if the new employee receives adequate training and guidance. Furthermore, a new worker may take somewhere around a year to become as productive in his work as the experienced workers are.
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