Employee turnover is a challenge many dairies face, explained Tracey Erickson, SDSU Extension Dairy Field Specialist.
"When dairy producers experience turnover they often ask themselves, 'is it me or my operation,'" she said.
Erickson explained that in order to examine this question, dairy producers first need to understand how to calculate turnover rates.
"There are two types of turnover - voluntary and involuntary," she said.
Voluntary turnover is when employees choose to leave a place of employment. Involuntary turnover is when employees are either laid off or dismissed by the employer.
"It is important to note that voluntary turnover is often the rate used to compare employers and is also a direct reflection of employee job satisfaction," she said. While involuntary turnover, Erickson explained, especially lay-offs, is more a reflection of the overall long-term business management. "But don't be fooled, employee job satisfaction can also impact a business long-term and its viability," she said.
So how should a dairy producer calculate voluntary, involuntary and total turnover rates? First, Erickson said, they need to select a period of time, then divide the number of employees who left by the total number of employees at the beginning of the period for each given measure.
For example: Dairy A had 45 employees at the beginning of the year, 7 voluntarily leave the operation, and 2 are dismissed throughout the entire year.
- Voluntary Example: 7 left voluntarily ÷ 45 total employees at the beginning of the year = 15.5% voluntary turnover rate
- Involuntary Example: 2 left involuntarily (dismissed or laid-off) ÷ 45 total employees at the beginning of the year = 4.4% involuntary turnover rate
- Total turnover: 9 total employees left (7 voluntarily + 2 involuntarily) ÷ 45 total employees at the beginning of the year = 20% turnover rate
Why should dairy producers care about employee turnover? "Turnover costs money and the higher the turnover rate the more money you are losing," Erickson said.
She uses this example to emphasize her point: All are hourly employees earning around $12/hour, working 50 hours/week calculates to an annual salary of approximately $31,200 for 52 weeks considering no overtime is paid. The estimated cost of turnover for one position is $31,200 at 100 percent to $46,800 at 150 percent. Now take that times the 9 employees that left either voluntarily or involuntarily and had to be replaced in the previous example. That equates to an estimated total turnover cost of $280,000 to $421,200 per year.
- Turnover costs go beyond dollars, Erickson explained:
- Costs associated with the person leaving include losses in productivity, extra management time spent covering for the open position, filling out necessary paperwork, lost employee expertise, unemployment insurance premiums, etc.;
- Hiring and recruiting costs can include advertising, interviewing, screening and background checks, etc.;
- Training costs which include materials and time training.
- Lost Productivity which includes the time it takes a new employee to learn the position and get up to speed, along with the extra time that is lost by management that could be spent in other areas of the business.
- New Hire costs, which include extra time and paperwork that is necessary when documenting a new employee and bringing them on board.
Erickson said the first step is to decide if a dairy operation has a serious problem or one you can live with begins with examining the turnover rates. "Turnover, in any business with employees is inevitable. In any business the owner determining the major cause of high turnover rates is vital to the long-term viability of the operation," she said.