How much does turnover cost your agency?
Do a cost analysis so you’ll know
Retaining employees is one of the private duty provider’s primary concerns. Turnover can negatively affect your bottom line as well as client satisfaction. But if you calculate your turnover costs, you might find you can offer staff better benefits for the same money.
A question about the cost of turnover for nursing assistants and home health aides was posed this fall to a home health on-line bulletin board by Mike McDaniel, PhD, an industrial psychologist and principal of Curry Business Systems, in Stow, OH. Curry Business Systems is a human resource consulting firm that offers applicant screening tools for nursing assistants and home health aides. (For information about joining the on-line forum, see p. 140.)
McDaniel asked how much providers spent on replacing one nursing assistant or home health aide. Providers that responded gave figures that ranged from $1,000 to $5,600. The mean estimate of the responses was $3,000, McDaniel says. Some of the estimates were provided as specific dollar amounts. (For providers’ comments, see p. 139.)
Others were provided as ranges, such as $1,000 to $3,000. In these cases, McDaniel used the midpoint of the range. Some estimates also were expressed as months of salary. To include such estimates, McDaniel assumed an hourly wage of $7 per hour with a 40-hour work week.
In his summary of the responses, McDaniel suggests that turnover can be reduced by improved applicant screening and by paying aides $1 more an hour.
Providers argue, though, that it is not always possible to increase the pay of the employees. Instead, agencies might be better served to spend more dollars on employee benefits and recognition programs, they say.
"Staff want to be recognized for their efforts," says Judith B. Clinco, RN, president and chief executive officer of Catalina In-Home Services in Tucson, AZ. Catalina offers staff incentives such as paid annual vacations, contributions toward health insurance premiums, and birthday parties. (For more details about Catalina’s incentives, see Private Duty Homecare, June 1997, p. 68.)
To adequately analyze recruiting costs, you have to consider the cost of turnover, says Colleen Sanders, RN, program development manager of paraprofessional staff development at Interim Corporate Service Center in Fort Lauderdale, FL.
The responses show that providers don’t have a strong idea of what their costs are.
"Historically, [turnover cost] has not been a well-tracked item, and that’s why you will have a hard time finding the average," Sanders says. "People are winging it. They really don’t know what they are spending."
Evaluating costs are especially important if you begin to see retention affecting your bottom line, Sanders says. Here are some warning signs: Are you using backup agencies to staff cases? Are you turning away business? Are you not getting repeat service requests from customers?
Agencies should consider the following internal and external costs when calculating the costs of recruiting home care aides:
1. Internal costs.
• prescreening time, interview time, application processing time and materials, and orientation and training materials;
• OSHA requirements, such as administration of TB testing and/or hepatitis vaccinations;
• background screening, if required by state law and if paid by the employer.
2. External costs.
• costs of ad placements;
• participation in job fairs and open houses.
"You need to look at how much time is being spent supervising, evaluating, and training that person to the organization," Sanders says. Look at the salaries of the people involved in this process and see how much time is spent on each applicant.
"You spend the most on them in the initial period after employment," she says. "How much is the supervision costing you?"
On an industry average, recruiting costs can average 8% to 15% of a nonprofessional person’s yearly salary, she says. The cost of recruiting professionals can reach 15% and higher.
Investing in the employees you have may reduce the cost of hiring others. "A good retention program pays for itself in the profits that it generates.
"Where you are spending is affecting your bottom line. You need to put your money where there is some possibility of increasing profitability. You will find that investing in your employees will increase retention and reduce the need to recruit."
[Editor’s note: For more information about nursing assistant screening tools, call Curry Business Systems at (330) 686-7912. To subscribe to the free on-line home health forum, send a message to: [email protected] and type SUBSCRIBEHCARENURS in the message body.]
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