The impact of employee turnover on your company

High employee turnover rates are a nightmare for many HR departments, especially in the tech sector, such as the robotics industry.

In an era where new technologies allow talent to work from anywhere, attracting people to your company can be a challenge.

Post-pandemic and with rapid digitalization, new generations no longer view work the same way. Employee job satisfaction also plays a role.

To build a team and achieve long-term results, you must train, measure, and facilitate your staff's work.

How are you addressing this issue in your company? Let's dive in! 😄

What is employee turnover rate?

First, let's clarify the concept.

Employee turnover measures the difference between the number of employees who join a company and the average number of staff over a given period.

The turnover rate is expressed as a percentage.

For example, if you have an average of 100 employees and 12 leave in a year, your turnover rate is 12%.

We’re talking about people who leave voluntarily, which is more concerning as the company did not decide to let them go.

However, the attrition rate, which also includes employees who left involuntarily, can also affect business results.

Why is high employee turnover detrimental to your company?

Several reasons make high employee turnover undesirable for many companies.

Talent decapitalization

‍A company is made up of people, not just processes and business models.

If experienced and visionary people leave the company, your business will feel it in terms of profitability.

Higher costs

‍When someone leaves your company, it incurs a significant cost. The training investment you made in them is lost.

Until you find and adapt a replacement, there will be a period where your sales or activities may suffer.

Why do employees leave companies?

One of the challenges in retaining talent starts with understanding why people leave.

Some reasons include:

• New Job Opportunities: The internet offers a wide variety of opportunities, both for remote work and abroad with better salary prospects.
• Lack of Professional Growth Opportunities: Some professionals don’t see a chance for advancement.
• Seeking Better Salaries: The job market still operates on supply and demand.
• Dissatisfaction with the Work Environment: Sometimes people are unhappy with their jobs. Mental health and emotional salary also matter.
• Cultural Shift: Millennials and Gen Z don't seek lifelong jobs. While the average tenure in Spain is 10.5 years, for millennials and Gen Z, it's about 2 years.

What is the employee turnover rate in companies?

A minimal amount of employee turnover is natural in a competitive market. It means there is flexibility and dynamism in the market.

But this doesn't usually benefit all organizations, which need to develop long-term working relationships to be productive and manage their knowledge and resources well.

Looking at some employee turnover studies (Randstad. Labor Turnover Report), we see that since the pandemic, the figures have been alarming, especially in large and medium-sized companies.

Spanish companies estimate that the turnover rate was 17% in 2022.

Although the figures have moderated post-pandemic, this means that, on average, nearly 2 out of 10 hired people left within a year, with the associated adaptation and training costs.

Depending on the sector, turnover rates can be much higher, with even greater costs.

In Spain, the turnover rate in tech companies is currently 35%, according to El Economista.

Costs of failing to retain talent in a company

The costs of employee turnover are complex to measure as they vary greatly by company.

Considering that, according to the INE, the average monthly labor cost is €2,892.73, this means a medium or large tech company has invested nearly €9,000 per month in salaries for every 3 employees who later didn’t stay with the company.

Two scenarios can occur:

• The employees who left were productive and contributed more to the company than they received.
• If they didn’t adapt and left within a year, their productivity might not have met expectations.

Even if the employee contributed more to the company than their labor costs, the need to replace professionals implies more expenses:

• Costs of new hiring campaigns and increased workload for the HR department.
• Waiting time between an employee leaving and finding a replacement.
• Initial training and adaptation costs for new hires, as they don’t always reach the desired productivity level immediately.
• Losses incurred if the company fails to find someone for a specific job.

All staff will retire or change jobs someday, but HR should aim for professionals to stay as long as possible.

Understanding this reality is essential for companies to appreciate the importance of optimizing training costs.

Optimize your staff training time

It’s not about training less but doing it more effectively and in less time.

To this end, new technologies like Uktena can be used to optimize the adaptation time of staff to your industry.

With a mixed reality solution (Virtual-Augmented), you can train staff faster and systematize case studies for technical jobs in various sectors related to industry and technology.

These technologies allow faster adaptation of staff to industry specifics. Consequently, AI not only preserves the company's knowledge but also transmits it efficiently, optimizing resources and improving staff productivity.