Most business owners understand that workplace injuries may lead to high turnover rates. We now know that the reverse is true, as well: High turnover causes workplace injuries. Sometimes employers get caught in a vicious circle as employee turnover feeds injury rates, leading to more turnover, and so on.
That’s not just bad for workers – it’s extremely expensive for employers, too.
Even without injuries, employee turnover costs employers a fortune, but its increased risk of serious accidents, magnifies its economic impact. A 2015 report from Springer finds that employees are far more likely to cause or incur costly accidents within the first weeks and months of employment than at any other time. One survey of federal accident data found that employees in their first year on the job account for 40 percent of all workplace accidents. Half of these accidents involved employees who are within their first 90 days on the job.
Accident and Injury Claims Costs
OSHA pegs the average workers compensation claim results in direct costs of approximately $30,000, But indirect costs can add up to four to five times that amount. Examples of direct and indirect injury costs include:
- Higher workers compensation premiums.
- Investigation costs
- Paid leave costs
- Replacing or repairing damaged equipment and property
- Costs of recruiting, interviewing and training replacements for injured workers or workers who have left the company.
- Higher medical insurance premiums
- Administrative costs in dealing with injuries, turnover and onboarding
- Legal expenses and liability (while the workers compensation system shields employers from lawsuits from injured workers, employers may still be liable for other damages).
- Fines and penalties from federal and state regulators.
All in all, the direct costs of employee injuries cost U.S. employers as much as $50 billion each year.
- Lost productivity due to loss of trained and experienced workers
- Reputational damage/loss of goodwill
- The investment made in training the lost employee (typically 10-20 percent of salary) walks out the door
- Increased error rates and fulfillment failures
- Reduced customer/client satisfaction
- Potential breaches of contract
- Increased injury rates (untrained workers have more accidents than trained and experienced ones)
- Loss of morale and employee engagement
- Temp overtime
- Property damage, cleanup supplies and safety equipment
Furthermore, significant direct and indirect costs from turnover and accidents eat up cash flows that you might be able to devote to protective equipment, repairs, maintenance and training to prevent future accidents – leaving you even more vulnerable to future accidents and associated costs.
What does turnover cost?
Data from the Department of Labor indicates that turnover leads to a loss of about a third of the replaced worker’s annual salary, in lost productivity, recruiting, retention and replacement costs. In some industries total costs of turnover can be as high as 150 to 200 percent of salary, says Josh Bersin, principal and founder of Bersin by Deloitte.
WHAT YOU CAN DO
- Hire right. Ensuring that the employee is a good fit for the job description and your workplace culture and pay them well can go a long way to preventing turnovers. Additionally, managers and first-line supervisors should be vigilant about the risks that brand-new employees pose, and provide the additional training and close supervision required to get them through the critical first 90 days on the job, when the potential for accidents and unsafe behavior is at its highest.
- Ensure benefits are competitive and relevant. Studies show that a robust benefits package tailored to your individual company’s workforce can have a significant impact on employee engagement and reduce eventual turnover. For example, if you have a lot of college age workers or recent college graduates, you don’t want to lose them to a competing employer because they are offering a modest tuition assistance or student loan repayment benefit.
- Reduce direct injury costs. Employers can help prevent or mitigate workers compensation claims by doing the following:
- Systematize safety and HAZMAT training for all supervisors and key employees.
- Appoint a safety counsel and hold regular meetings. Put a capable and senior leader in charge and give them the authority to carry out their recommendations.
- Develop and rehearse an accident response routine/protocol. Put it in writing and refine as necessary.
- Create a transitional ‘return to duty’ program to reintegrate injured workers as quickly as possible.
- Provide paid time off for sick employees – so they aren’t driving or operating heavy machinery while on medication.
- Create trust with current employees. High turnover has a psychological cost: It disrupts teams of workers who have learned to trust one another from experience. When a new employee comes in, fellow workers don’t have the same trust in the new worker’s training, experience, attention to detail and ability to work safely. However, results in a study done in a high-risk high-turnover workplace, forest harvesting, indicate that trust in induction processes was negatively correlated with perceived risk from a new employee. As a result, the more trust current employees perceived in management that new employees will be introduced in a safe way will lead to less injuries.
Focus on improving job satisfaction: The key to retention
Studies show that poor job satisfaction is linked to higher injury rates in the workplace. You may be able to make significant progress in injury risk reduction and turnover costs by improving job satisfaction which will lead to better employee retention. Employers who wish to break the vicious cycle of injuries and turnover costs would do well to revisit job satisfaction on a regular basis, and constantly work to improve them. Proven methods to improve employee job satisfaction include:
- Regular employee recognition
- Voluntary benefits (available at little or no cost to the employer)
- Health insurance
- Competitive compensation
- Eliminating improper discrimination and harassment.
- Telecommuting/work from home opportunities
- Employee health and wellness programs
- Top-of-the line workplace technology