Warehouse Turnover Hurts More Than You Think

According to recent U.S. Bureau of Labor Statistics figures, warehouse worker turnover rate was 49%. Let that sink in for a minute. Nearly half of all warehouse associates left their jobs. (It’s three times higher at Amazon, which turns over warehouse employees at a rate of roughly 150% per year.)

Employee turnover accrues more than just operations manager headaches and unfilled orders. They also add up to significant costs. By our calculations, the hard and soft costs of turning over a single employee total approximately $18,600. Multiply that by half of warehouse’s current headcount, and it’s easy to see why more organizations are making the business case for automation based on lost revenue associated with a lack of available labor.

Turnover Cost Calculation

How did we arrive at $18,600?

We first determined the average hourly rate of pay for the departing employee ($18.35), as well as for their direct supervisor ($28.25) and a human resources staffer ($24.30).

We then applied those wages to calculate three hard costs for a total of $8,900.

1. Hard Separation Costs. These include the time spent by HR and the departing employee in an exit interview (which, in an era of no-show employees and quitting by text, we recognize is a rarity). They also cover any annual leave payout and unemployment benefits.
2. Hard Vacancy Costs. With one fewer worker available to complete tasks, others must pick up the slack. That includes the cost of a temporary hire and/or additional shifts or overtime pay for employees who remain.
3. Hard Replacement Costs. These include both time and expenses associated with job postings, interviewing, and any pre-employment testing (again, we acknowledge that many warehouses have eliminated reference and background checks, drug testing, and other qualifying evaluations to speed up the hiring cycle). They also represent time spent by HR, supervisor, and new hire in orientation and on-the-job training, plus uniform costs (if any).

Additionally, we calculated three separate soft costs that added up to $9,700.

1. Soft Separation Costs. This includes productivity losses associated with a departing employee who actually gives notice (typically up to 75%). Their colleagues also suffer a decrease in productivity and a significantly increased workload as they make up the 40 hours a week previously assigned to the lost worker.
2. Soft Vacancy Costs. With nobody filling the vacant position, productivity drops. Further, supervisor productivity declines too, as they fill in to help out and coordinate schedule adjustments.
3. Soft Replacement Costs. There is typically a 6-week learning curve for any new hire, which results in lost productivity until they are fully versed in their new role. Meanwhile, co-workers and supervisor also lose productivity as they help the new employee get up to speed.
   

Obviously, the wage numbers vary depending on geographic region, shift schedule, level of experience, and so on. But the point is, every warehouse worker who quits represents a significant hit to productivity, costs, and ultimately the bottom line. It’s just another factor that underscores why automation is a necessity in today’s warehousing operations.

Need help determining your operation’s turnover costs? KPI’s team is happy to help you assess the needs of your business. Contact us today.