Employee Turnover: It Is Important in Agriculture Also

 

Lots of conversations in agriculture lately focuses around labor or the lack of a labor pool of employees. This is the case not only for dairy farms, but also within the entire agriculture industry. In self-reflection, it does raise the question, “Is it me or my operation, is there simply a lack of employees, or is it both?” To examine these questions, we first need to understand how to calculate turnover rates.

 

There are two types of turnover, voluntary and involuntary. Voluntary turnover is when employees choose to leave a place of employment of their own free will. Involuntary turnover is when employees are either laid off or terminated as result of a decision of 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. Involuntary turnover on the other hand, especially lay-offs, is more a reflection of the overall long-term business management, especially where lay-offs are concerned. But don’t be fooled, employee job satisfaction can also impact a business long-term and its viability.

 

How do I calculate voluntary, involuntary and total turnover rates?

First 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 that year, and 2 are dismissed throughout the entire year.

 

Employee turnover costs money and the higher the turnover rate the more money you are losing! We can estimate conservatively that hourly employees cost 100 to 150 percent of a position’s salary and salaried positions (which are often management positions) a conservative estimate is 200 to 250 percent (Moore, 2012). Let’s put that in perspective using the example above.

 

All are hourly employees earning around $15/hour, working 50 hours/week, which calculates to an annual salary of approximately $39,000 for 52 weeks considering no overtime is paid. The estimated cost of turnover for one position is $39,000 at 100 percent to $58,500 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 $351,100 to $526,500 per year.

 

Total turnover costs accumulate in a variety of ways such as the following: (Moore, 2012)

 

 

Bottom line is that turnover costs money. The first step is to decide if you have a serious problem or one you can live with is by examining the turnover rates. Turnover, in any business with employees is inevitable. However, if you find your turnover is excessively high you might look to conducting exit interviews with employees that quit. Keep in mind these exit interviews, should be conducted by a third party if you are going to get to the root of the reason that an employee is leaving. Reason being, the most common cause that people leave is their boss and to get that “honest” answer you need to have that third party decipher “why” employees are leaving.

 

In any business determining the major cause of high turnover rates, followed by an action plan to minimize turnover rates is vital to the long-term viability of the operation.