Employee Turnover Creates High Costs for Small Businesses
When you think of employee turnover, you may think no big deal your company can get someone else to fill the position. In reality, employee turnover is costly for all businesses, especially small businesses.
In fact, “32% of workers are expected to leave their employer within the first year. Turnover is much higher for people who earn the federal minimum wage, with 70% of these employees expected to leave” per CNBC article. The relationship between minimum wage and turnover rates is complicated and presents a number of implications for small businesses.
Employee Turnover Rates and Minimum Wage
CNBC notes, “an analysis of tens of thousands of small businesses reveals that the employee turnover rate is more than double the national average when employees are paid the federal minimum wage of $7.25/hour. With a nationwide movement to raise the minimum wage to $15/hour, the research shows that turnover rates would decline as a result, though with a diminishing impact once wages pass $15.”
If the “Raise the Wage Act doesn’t pass the Senate, many cities and states are considering raising their own minimum wages” per w.investopedia.com. Going from $7.25/hour to $15/hour is a large step and many small businesses lack the kind of a budget to keep up. Therefore, small businesses need to stay aware of local legislation and find ways to prepare for potential minimum wage hikes now. Businesses focused on cutting costs where they can won’t have to take as big of a hit when minimum wage rises.
Alternatively, if the minimum wage is increased to $15/hour, then everything else may follow and go up in price; utilities, groceries, fast-food, etc. Is raising the wages the answer, or is it only a band-aid for a larger problem?
The Effects of Employee Turnover
Numerous employees leaving an organization creates low morale for the other employees. Balancecareers.com notes the low morale is due to “overworked employees who have had increased workloads and responsibilities due to a lack of an active or trained workforce.” They go on to add how “new employees are not immune. They too may suffer from low morale as they struggle learning new job duties and procedures.”
The burden put on veteran employees to train new employees and help check their work can also lead to more burnout, and in turn, more employees leaving the organization.
Turnover Autonomy and Management Opportunities
As reported by CNBC, in a recent analysis of why employees leave small businesses the study “found a strong correlation between hourly wage thresholds and the rate of turnover. One of the most important factors when it comes to turnover is job autonomy.” Job autonomy can be offered in a number of ways. It is important to consider it doesn’t always have to include a title change and wage increase. This same articles reports, “small businesses have few management opportunities, but they [can] assign more responsibilities on employees such as managing a project.”
Small businesses have a lot to consider when fighting the battle of employee turnover. Filipek & Company can assist with businesses with accounting services to identify ways to achieve success without sacrificing their work force.