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Many companies have a waiting period for benefits. Could be a big saving with new employees.
The waiting period is often 30, maybe 60 days. I've never heard of more than that unless they don't offer benefits at all.
As JWiley and Step33 pointed out so clearly, new employees don't start earning out their salary for several years, so a few months of saving health insurance and sick days is small potatoes in the whole scheme of things.
I know several recent grads who got job offers where the insurance started the month they did, no waiting period at all.
The costs of onboarding new employees can be found in many areas. Training & HR administration, as have been noted, are biggies. All of the paperwork and government filing that is associated with each employee takes time which costs money.
Someone mentioned something to the effect that fast food wouldn't be impacted by turnover because someone can be trained in a few hours? Please. I used to manage a Burger King back in the day and even in a low-skill environment like that it can take awhile for employees to become experts at all the different positions.
I'm in IT now and just hired a guy out of college back in June. I work closely with him, mentoring him on the business and the projects and everything else. What a huge waste of time and money the last 6 months would have been if he were to leave.
Another area of cost that flies under the radar of most employees is the UE taxes, both state & fed. These are taxes employers pay on the first $x (varies by state) of each employee's wages each year. Typically in the 8-12k range. So if you hired 4 employees one after another, and say the state's UE wage limit is 10k, and paid them 10k each before they quit, you're paying these taxes on all 40k of wages. If you had one employee stay for the whole year, you only pay taxes on 10k of wages.
Workers comp insurance is another employer cost that has wage limits in many states, although these typically are much higher limits so it wouldn't be a factor in as many scenarios.
bottom line is, onboarding, training, administration, taxes... it all adds up to a costly part of business.
One thing to keep in mind is that not all "veteran" employees are productive either. I work in utilities, and we have an increasingly more stubborn older workforce who is very set in their ways and not willing to change processes, technology or skills to adapt to a changing business environment. Newcomers more or less change around the veterans, and as soon as that old guy/gal leaves, they immediately replace them with a whippersnapper.
Turnover can be a benefit as it gets fresh blood into the organization, people like me who are excited by change and the adoption of new technology and new methods. I'm not advocating for folks to change jobs every year, but I don't see changing jobs every 3-5 years as a bad thing, as you are building on past experience and increased salary. I'm a newbie in this company even though I've been here for two years, but in those two years I've taken the initiative to learn as much as people who've been here for a decade. Every day is something different, and so I'd like to stay longer. If a better opportunity arose (or a similar position in a warmer climate), I wouldn't hesitate to move, but in general I actually wish I could move closer to my job to be able to put in more hours with less commute.
I'd much rather work for a demanding and creative employer like Google or Apple than a company that distrusts technology and prefers paper.
Last edited by TrailMapper; 12-19-2014 at 10:18 AM..
The costs of onboarding new employees can be found in many areas. Training & HR administration, as have been noted, are biggies. All of the paperwork and government filing that is associated with each employee takes time which costs money.
Someone mentioned something to the effect that fast food wouldn't be impacted by turnover because someone can be trained in a few hours? Please. I used to manage a Burger King back in the day and even in a low-skill environment like that it can take awhile for employees to become experts at all the different positions.
I'm in IT now and just hired a guy out of college back in June. I work closely with him, mentoring him on the business and the projects and everything else. What a huge waste of time and money the last 6 months would have been if he were to leave.
Another area of cost that flies under the radar of most employees is the UE taxes, both state & fed. These are taxes employers pay on the first $x (varies by state) of each employee's wages each year. Typically in the 8-12k range. So if you hired 4 employees one after another, and say the state's UE wage limit is 10k, and paid them 10k each before they quit, you're paying these taxes on all 40k of wages. If you had one employee stay for the whole year, you only pay taxes on 10k of wages.
Workers comp insurance is another employer cost that has wage limits in many states, although these typically are much higher limits so it wouldn't be a factor in as many scenarios.
bottom line is, onboarding, training, administration, taxes... it all adds up to a costly part of business.
I see what you're saying. One thing though, the employee you hired back in June. If he were to quit today, I agree that it would be wasted time that you've invested, but it wouldn't cost you or your company MORE money. You guys would simply hire a new person at the same wage. Say it took you one month to hire a replacement, then that's one month of savings where you didn't have to pay anyone for that position. Do you see where I'm coming from?
I see what you're saying. One thing though, the employee you hired back in June. If he were to quit today, I agree that it would be wasted time that you've invested, but it wouldn't cost you or your company MORE money. You guys would simply hire a new person at the same wage. Say it took you one month to hire a replacement, then that's one month of savings where you didn't have to pay anyone for that position. Do you see where I'm coming from?
But that is also 1 month more of lost production that you are losing.
I think the big thing you are missing is that companies only hire someone to do a job that they need filled to get business done, they are not doing it out of goodwill. Losing time and production for 6 months hurts the bottom line, than adding another full month of no production means another month of lost income or benefit to the company for that job.
Now understand that others can usually help cover for 1 missing employee, but there is a cost in both their time being taken away from other jobs and their stress and burnout adding up quicker.
I see what you're saying. One thing though, the employee you hired back in June. If he were to quit today, I agree that it would be wasted time that you've invested, but it wouldn't cost you or your company MORE money. You guys would simply hire a new person at the same wage. Say it took you one month to hire a replacement, then that's one month of savings where you didn't have to pay anyone for that position. Do you see where I'm coming from?
The piece you're missing is this.
Time IS money. One month of missing a person is one month of not getting stuff done. You do realize that companies are in business to make money, and they hire employees to help them do that, right? And that using simple math, they expect to get more profit from an employee's work than it costs them to pay that employee? I mean no one hires an employee with the thinking that they are going to pay this employee but not have that employee earn back more than he costs cost... well unless you're the government... which is why government projects and departments are commonly bloated and over budget... and why we're now north of 18 Trillion in debt... but I digress.
I am (or any employee is) working to produce a product or service that in theory helps their company profit. If I spent 50% of my last 6 months (4 hrs per day) training and mentoring a new employee, then that is 50% of my time that is not available to do my normal work to produce products (in my case computer programs) for my company. Well unless I ADD that 4 hours per day and I'm sorry, as much as I like my company I'm not eager to add 20 hrs extra per week to my schedule.
So if my employee leaves and I have to hire and spend the next 6 months training a new one, then that's 6 more months of lost productivity, and ultimately lost profit.
Training is part of the landscape- you can't get away from it. And it costs time & money. If you spend the time on someone who leaves then you've wasted that time and money.
We had a guy once 6 or 8 years ago who left at lunch. First day. Never came back from lunch. At least we didn't waste a lot of training time on him.. but still the paperwork and admin tasks leading up to the hire were all still wasted time and money.
I agree with everything you said, except the portion I put in bold letters. How is it "costly". It's not like you're paying anyone extra to interview and train these employees. The people involved in the hiring and training process would be paid the same anyways. Maybe my mind isn't wrapping around a core concept here...
It costs man hours. A lot of interviews take time away from managers who could otherwise be using it on productive labor. The new person's learning curve is also going to take time away from managers, because they're going to be pulled away to show them how to do something or where to look for something. Every job has a learning curve.
The piece you're missing is this.
Time IS money. One month of missing a person is one month of not getting stuff done. You do realize that companies are in business to make money, and they hire employees to help them do that, right? And that using simple math, they expect to get more profit from an employee's work than it costs them to pay that employee? I mean no one hires an employee with the thinking that they are going to pay this employee but not have that employee earn back more than he costs cost... well unless you're the government... which is why government projects and departments are commonly bloated and over budget... and why we're now north of 18 Trillion in debt... but I digress.
I am (or any employee is) working to produce a product or service that in theory helps their company profit. If I spent 50% of my last 6 months (4 hrs per day) training and mentoring a new employee, then that is 50% of my time that is not available to do my normal work to produce products (in my case computer programs) for my company. Well unless I ADD that 4 hours per day and I'm sorry, as much as I like my company I'm not eager to add 20 hrs extra per week to my schedule.
So if my employee leaves and I have to hire and spend the next 6 months training a new one, then that's 6 more months of lost productivity, and ultimately lost profit.
Training is part of the landscape- you can't get away from it. And it costs time & money. If you spend the time on someone who leaves then you've wasted that time and money.
We had a guy once 6 or 8 years ago who left at lunch. First day. Never came back from lunch. At least we didn't waste a lot of training time on him.. but still the paperwork and admin tasks leading up to the hire were all still wasted time and money.
I see, so it doesn't cost the company MORE money per-say, but it does wastes their money. I get it, thanks for replying everyone!
I see, so it doesn't cost the company MORE money per-say, but it does waste their money. I get it, thanks for replying everyone!
Have you heard of the term opportunity costs? Lost production is considered a "cost" to a company. The time that could otherwise be spent on generating revenue and profits is allocated to training a new employee. Companies DO look at that as a cost, not necessarily a waste though.
I see what you're saying. One thing though, the employee you hired back in June. If he were to quit today, I agree that it would be wasted time that you've invested, but it wouldn't cost you or your company MORE money. You guys would simply hire a new person at the same wage. Say it took you one month to hire a replacement, then that's one month of savings where you didn't have to pay anyone for that position. Do you see where I'm coming from?
You're missing the fact that the employer also has to pay UE tax on the new employees wages - starting back from zero.
Scenario 1:
1 person works same role all year, I pay 1.5% in UE tax on their first $15K, they make 60K in the year.
Scenario 2:
I go revolving door at same wage, but a new employee every quarter. I pay 6% in UE tax.
Money is also money.
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