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Front Page » January 9, 2007 » Local News » Businesses experience climbing turnover rate
Published 2,758 days ago

Businesses experience climbing turnover rate


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By C.J. MCMANUS
Sun Advocate reporter


Climbing turnover impacts employers and employees alike. Nick Tatton, Price City Community Development Coordinator reports that many studies and estimates indicate the actual cost of turnover to be between three and eight times the cost of the base employees yearly salary.

During last Friday's monthly business expansion and retention (BEAR) meeting, local economic officials discussed problems associated with the county's current labor shortage and how that, coupled with quality of workforce issues, are impacting the community.

The BEAR project is set up to contact all businesses in Castle Country in order to measure trends within the local economy to assist in accurate development planning based on the information gathered.

In the past few months, the project has seen increased productivity by providing more than $158,000 worth of service locally. The number comes primarily through tax credits available through the Utah enterprise zone.

The project has also provided $16,000 in cost savings and $80,000 in increased revenue for business owners in Castle Country.

The information and referrals that make the process possible are provided to local economic officials by the project's outreach specialists.

After visiting a total of 321 local businesses, program representatives reported the fact that companies operating in the Castle Valley region are having difficulty with meeting workforce demands.

Local merchants and service providers have seen record turnover in the last year, according to BEAR specialists.

"The BEAR program has preliminary results showing that turnover is a major factor in the local economy. As good employees become more scarce, as evidenced by the low unemployment rate, turnover becomes more of a critical concern," said Nick Tatton, Community Development Director for Price city and BEAR administrator.

"Maintaining and motivating stable long-term employee/employers relationships can produce positive cash flows and operating profits; whereas high turnover may give the appearance of short-term benefits in some circumstances, but is mostly a cost in the medium and long term," continued Tatton.

One projected reason for the problems with employees is the low statewide unemployment rate.

The November 2006 data compiled by the Utah Department of Workforce Services show the state unemployment rate registering at 2.6 percent, with Carbon County posting the same jobless level. The county and state unemployment rate is nearly half the national average of 4.5 percent.

And the national picture is getting tighter all the time. Human resources and staffing experts predict that employers will face one of the worst labor shortages ever in the next five years.

According to a 2000 United States Bureau of Labor Statistics report, there could be as many as 10 million more jobs available than there are employees across the nation by year 2010.

Competition for employees drives up wages and shortens the length of tenure at any job, creating an environment that fosters a lot of voluntary turnover.

Calculating employee turnover costs

Consultant Ellen Freedman has identified several costs associated with letting an employee go, including:
•Severance pay, pay for accrued vacation and other time off.
•Increases in unemployment taxes.
•Cost of benefits continuation.
•Advertising and/or recruiter fees.
•Interview expenses which can include airfare, hotel, meals and mileage.
•Criminal, reference and credit checks.
•Orientation materials.
•Formal training programs, materials and course fees.

The trend can prove costly for all businesses, but high turnover rates can be devastating to smaller employers, according to local economic officials.

The actual cost of employee turnover can be a difficult figure to calculate.

Ellen Freedman of Freedman Consulting has compiled a list of additional costs associated with layoffs or having employees leave the workplace voluntarily.

The related business expenditures include:

•Administrative costs related to processing the employee's separation, involving benefits, payroll, IT security, notifications to insurance carriers, filing unemployment forms and so forth.

•Lowered productivity for peers, the employee who is departing, and supervisors and subordinates

•Time spent in exit interviews and transition meetings, tracking file dispositions, documenting file status, procedures, etc.

•Creating and placing advertisements and job descriptions.

•Loss of clients or increased activity to retain clients

•Disrupted department operations

•Loss of institutional information

Experts in the job placement field agree that the actual cost of turnover is equivalent to between 1.5 and two times the annual salary of the exempt or post-probationary departing employee and .75 times the salary of an non-exempt or probationary worker, indicated the 2000 U.S. Bureau of Labor Statistics report.

At last week's meeting, BEAR outreach specialists reported that employers are letting people go at an alarming rate in the Castle Valley region.

The high rate of employee turnover is viewed as the one problem area in an otherwise robust Carbon County economic outlook, pointed out the BEAR committee.



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