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April 2018

Wendy L. Hansen

The Tangle of Employee Turnover: How Employment Law Can Help

With the unemployment rate at an all-time low, the employee turnover rate is at an all-time high. Few industries are safe from the high turnover percentage. In 2017, total employee turnover increased to 18.5% from 17.8% in 2016 and from 16.7% in 2015 (Turnover Report 2017, Compdata Surveys Consulting). A steady increase in turnover was seen amongst all industries. Hospitality saw a 29.4% turnover rate, while healthcare was at 20.5% and manufacturing was at 17% in 2017 (Turnover Report 2017, Compdata Surveys Consulting).

High employee turnover is a huge cost for companies, especially the retail and restaurant industries. The Center for American Progress reported that losing an employee can cost anywhere from 16% of the person’s pay for hourly employees to 213% of the person’s salary for a highly trained positions (Quantum Workplace, 17 Shocking Employee Turnover Statistics, Annabelle Smyth). So if your employee’s hourly pay was $14/hour, then at best it will cost you $4,659.20 to replace the employee. If you are seeing turnover upwards of 20%, that becomes a significant cost to your business. The down flow effects can also be significant, including quality issues, information and knowledge retention, and customer satisfaction. It takes a new employee about two years to be as productive as a current employee (Quantum Workplace, 17 Shocking Employee Turnover Statistics, Annabelle Smyth). Needless to say, high employee turnover can cost a business a lot of money.

So what can an employer do? Obviously it is crucial to be competitive in the pay market. Talking to your recruiters and human resources department is essential to understanding what the market is willing to pay for a good employee to keep that employee. However, pay is actually a small part of why a person stays or leaves a company. Other factors such as work environment, training, supervisors/management, company culture, and work-life balance play a role in the decision to leave a company. At the end of the day, what causes an employee to be dissatisfied with their employer is unmet expectations.

How can employment law help with employee turnover and unmet expectations? In many ways, laws and regulations are seen as another layer of business operations. It can seem like a burden and being sued can add insult to injury, especially when you feel as though you have done everything you can. However, instead of seeing laws, more specifically employment laws, as additional regulations to add to your employee handbook, look at this as an opportunity to strengthen your relationship with your employees and set out clear expectations.

Here are seven suggestions on how following employment law principles can create good relationships with your employees, reduce turnover, and help your business:

1) Be equitable. Do not play favorites. This seems to go without saying, but be fair in how you treat your employees. If one person is reprimanded for a violation of a company policy be sure to apply that a rule consistently across the board. A major issue in discrimination cases is disparate treatment from one demographic to the next. What applies to one must apply to all – African American, Caucasian, male, female, able, disabled, old, young etc. Make sure that if you want your employees to do something, you let them know. All of them. If you give a merit based promotion to someone, make sure it’s well documented with specific reasons. If you choose not to give a promotion to someone, again, make sure it’s well documented and with specific reasons. Be self-aware. Make sure you are aware of any cultural and gender biases you have. Be removed from the person when you look at their actions.

2) Have candor. This is probably one of the hardest to practice. Most people do not like confrontation and having to deal with difficult employees can, well, be difficult. However, how exactly do you expect someone to improve if you do not tell them what is wrong in the first place? Articulating those expectations, in a calm, clear, and formal manner is crucial to a good employee-employer relationship. Employees will respect supervisors who are open and honest. See each employee as an investment and not a burden. In order to invest properly in the employee, they need direction and they need to know what is right and wrong. If worst comes to worst and you feel terminating the employee is best, then at least they won’t be surprised by the decision if you have been open and honest with them all along.

3) Document, document, document. Everything. This is crucial. Not only for future litigation purposes but also for maintaining good employee relationships. When you document, it shows the employee you and the company care about what is being done and said. That it has significance. It’s more than an informal talk on the sales floor, it matters. It communicates to the employee that you are 1) paying attention to their (good and bad) actions and 2) you expect them to behave a certain way (i.e. encouraging good behavior or dissuading bad behavior). A signed award for good performance can have just as far-reaching effect as a signed warning for poor attendance.

4) Stop overselling. This can seem counter intuitive when companies are vying for the same good employee. However, you want to do more than just get an employee through the door, you want to keep them. The Harvard Business Review states that more than 80% of turnover is due to bad hiring (Quantum Workplace, 17 Shocking Employee Turnover Statistics, Annabelle Smyth). This means that the opportunity to lay out clear expectations starts in the first interview. Be honest about your benefits. Be honest about the work environment. Be honest about the culture. Most importantly, be honest about timing. Timing for training, benefits, promotions, and raises. Employees will be frustrated and more likely to leave the company if you oversold them on the position, rather than if you were honest and their expectations meet reality.

5) Follow your own rules. If you say, it then do it. If you say there will be a consequence, then follow through on the consequence. At the very core of this issue is trust. Employees need to feel that they can trust your company so you must follow through on what you say. It’s noteworthy that reprimanding is about SO much more than the individual employee, it’s about the company as a whole. When you fail to reprimand someone for doing something wrong, it hurts the good employees. It hurts the employee who just does her job. She punches in and out on time. She cleans up her area. She’s good to customers. She does what she is told. Not caring when an employee does something wrong means that you also don’t care when they do something right. Losing employees’ trust wins no favors and earns no gain.

6) Be understanding. It may seem conflicting to the other advice given here, but being understanding and being a rule follower are not mutually exclusive. Take each situation as it comes. Use more than one person in the decision-making process. Be helpful and understanding if a disability or illness arises. Get the employee the appropriate resources as soon as possible. If an employee needs an accommodation, do NOT express frustration or act put off. Follow the appropriate guidelines. If possible, seek the advice of an attorney to ensure you have done everything you can do to make sure the employee was accommodated. Again, this helps the current employee relationship as well as future litigation.

7) See the good. This is more than just a nice hashtag. See what your employees are doing right. Thank them for doing their job. It’s not enough that you pay them, they want to feel appreciated. This is the case REGARDLESS of what generation you or they are from (it’s not just millennials who want a pat on the head). Do not assume they know you appreciate them. Tell them. Do not just reward those who go above and beyond. Reward consistency too. Be sincere in your praise and use specific examples. Rewards do not have to be monetary. A thank you as you walk out the door or pass by can be just as impactful. People want to know where they stand and how they measure up to your expectations. Do not keep them guessing. Productivity and customer service go out the window when someone is anxious. More importantly, if the employee feels anxious, they will likely look to leave the company.

These rules might seem like just good business practice, but they follow the essence of employment law principles. Be fair, reasonable, equitable, open, and honest. In doing so, you will hopefully develop greater relationships with your employees, reduce turnover, and reduce future litigation.
Wendy L. Hansen

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