Manufacturing Employee Turnover: 3 Tips to Reduce Costs

Are you looking for ways to reduce the financial burden high employee turnover rates places on your company?

Your company is likely to see an increase in employee turnover rates due to organizational mistakes or inadequate training. According to a recent report published by Tooling U-SME, voluntary employee turnover costs companies hundreds of thousands to millions of dollars.

Some of the most common costs of high employee turnover rates are recruiting, onboarding, and training, but other factors affect costs too. Some of these include a decrease in productivity, a decrease in customer satisfaction, and the impact high turnover rates have on employee morale.

The workforce is a manufacturer’s greatest business asset, so it’s critical that they continue to invest in the learning and professional development of their teams to help them remain competitive. When companies ignore the dangers of CoT (cost of turnover), they run the risk of losing money, encountering issues with customer delivery, as well as employee issues like low morale and overworked staff. If prolonged, high performers will leave companies to go work for competitors that value and invest in employee development.

Jeannine Kunz

Vice President of Tooling U-SME

3 Tips to Reduce the Cost of Manufacturing Employee Turnover

Manufacturers can reduce employee turnover rates in several ways. Employees should learn what you expect out of them during the hiring process. Your onboarding program needs to be top-notch, and you should check in on new hires frequently. 

Show potential candidates how they can work their way up in your company, and assign trainers or mentors for new hires. It’s crucial to ask for feedback from trainees so you can assess your trainers. Review the surveys and look for potential opportunities to improve training techniques.

Follow the 3 tips below to help you lower your employee turnover rate so you can reduce costs and keep your employees working for you longer.

1. Review the Data

Your employee turnover rate is the number of employees who voluntarily resign or are terminated due to performance issues within a specific time frame. Employees who retire are not typically included in this number, but you can include them if you wish. Make sure to specify this in the report if you do.

You can calculate your turnover rate with the following pieces of information:

  • The number of employees who were active at the beginning and end of your specified time frame.
  • The number of employees who resigned or were terminated.
  • The average number of employees within that time frame.

Monthly Turnover Rate Calculation: 

Add your beginning and ending workforce numbers, then divide the result by two. Divide the number of employees who were resigned or terminated by the average number of employees. Multiply the result by 100 to get the turnover percentage.

Employees Who Resigned or Were Terminated / Average Number of Employees * 100 = Monthly Employee Turnover Rate Percentage

Annual Turnover Rate Calculation

Annual turnover rates can be more informative than monthly rates. Use the following calculations to calculate your annual turnover rate.

Add the beginning and ending numbers of your employees and divide the result by two. Divide the number of employees who resigned or were terminated by the number you just got. Multiply the result to get the annual employee turnover rate percentage.

Employees Who Resigned or Were Terminated / ((Beginning +  Ending Number of Employees) / 2) * 100 = Annual Employee Turnover Rate Percentage

Once you have calculated your turnover rate, compare your results with other companies in your industry and region. Having a rate that is higher than the average rate of these companies means you have room to make improvements. 

Related Reading: Adding It Up: The Real Cost of Partnering With a Fabrication Shop

2. Improve Your Internal HR Processes

Understanding why your employees resign will help you implement changes that entice them to stay. Ask employees who resign to complete exit surveys. Review the surveys and find out where you can make improvements.

24% of people leave a company because they want increased pay, and 21% leave for the opportunity to advance their career.

Giving everyone at your company a raise isn’t the most cost-effective solution. Improving your internal HR processes can give you similar results without as much of a financial burden.

Hiring candidates who are more qualified for the positions in your company is an excellent place to start. It might take longer to fill open positions, but you’re more likely to keep those hires actively employed much longer.

Look for candidates who have the most desirable skills, experiences, and qualifications for the job. Vet them thoroughly from the start, and consider adding extra steps in your hiring processes if necessary.

Have them perform “on the job” skills assessments. Give them an example scenario of a situation they are likely to face on the job and ask them to explain or demonstrate what they would do.

Reward your employees for significant achievements and give them opportunities to advance in their career within your company. Offer in-house training with promotions upon completion and bonuses for employees who achieve predetermined goals that boost productivity or profits.

Related Reading: How Your Fabricator Can Help You Lower Cost While Adding Value

3. Outsource Some of Your Manufacturing Needs

Outsourcing some of your manufacturing needs can keep you from having to deal with the costs of hiring and training employees. High turnover rates for those jobs won’t be your concern anymore.

Manufacturing products in-house takes a lot of work and places several demands on your company. You’ll need to purchase the necessary equipment and implement new protocols to maintain it. 

Operators will have to be trained on how to keep the machines running for optimal performance, and machine malfunctions can be pretty costly.

Don’t forget the cost of materials, quality control procedures, packaging, and shipping. Add to that the high costs of labor and employee turnover, and you can quickly start to see why outsourcing might make more sense for your company.

Engineered Mechanical Systems (EMS) is a top-notch fabricator that can help you complete your manufacturing projects without the extra overhead. Our team of experienced engineers will work closely with you to alleviate your concerns and achieve the results you need.

Contact us to speak to one of our experienced engineers about your project, so we can help you reduce your financial burden.

Find Out if EMS is the Right Fit for Your Project