This Week's Herman Trend Alert

Leadership in Normal 2.0
 

  The Herman Trend Alert

June 14, 2006

Turnover Will Fatten Payrolls

Employers are experiencing increasing employee turnover, which causes a number of problems for them. One of those problems, not seen for a number of years, is beginning to resurface in many companies. The situation will become much worse before it gets better.

Payroll costs are increasing because employers are adding more people.

Regardless of the instability of their workforce, employers must still satisfy their customers. If positions are vacant—because people have left or companies have not been able to recruit qualified applicants, someone has to complete required tasks. Management has been forced into applying two strategies: First, current employees are asked to work more hours—pushing compensation costs and potentially wearing out the people who are forced to work the extra hours. Increasingly, workers are refusing to work too many hours, wanting to spend more time with their families. In some cases, they simply do not have additional time because of childcare or other responsibilities.

Second, employers must hire extra people to cover themselves. The extra people hired in high turnover organizations are viewed as a safety net. If employees leave, additional workers are brought in to perform the open jobs. Cautious employers will over-staff to assure that they have enough workers on the payroll to fill positions. The over-staffing situation means that some employees may be kept busy with training or tasks that really don’t have to be done.

Expect some companies to tell workers to stay at home on particular days. They will receive stand-by pay, but not actually show up for work. Employers with several locations in close proximity may have employees report for work in different facilities on different days, just to keep them busy and engaged with the employer.

Some employers will build closer relationships with staffing agencies or professional employer organizations (PEOs) to assure they will have people available when and where they are needed. Some employees may be placed on job rolls in arrangements similar to substitute teachers.

Extra people mean extra costs, which must be passed to buyers. But, at least there will be a greater chance of satisfying those buyers.


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