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The Real Cost of High Turnover Rates in Industrial Companies: Why Automate the Palletizing Process

Nicolas Lauzier
by Nicolas Lauzier. Last updated on Aug 02, 2023 10:10 AM
Posted on Aug 02, 2023 9:21 AM. 7 min read time

In the industrial sector, high turnover rates are a significant concern. Perhaps you are experiencing issues related to labor shortage within your own company. The process of hiring and training new employees is not only time-consuming but also considerably costly. This article shed light on the real cost of high turnover rates in industrial companies and explains how palletizing automation can provide a durable solution.

The Hidden Costs of Employee Turnover

When an employee leaves a company, the impact is not just a vacant position. The departure can lead to operational disruptures, additional training for new hires, knowledge transfer or loss, and potential overtime for the remaining team members. Overall, the cost of an employee's departure can be around 25% to 250% of the annual salary, depending on the level of knowledge required for the position, and this figure has been on the rise in recent years.

The Recruitment Process: A Significant Expense

Recruiting new employees is a costly affair. According to Robotiq’s HR specialists, a sponsored job posting alone can cost between $500 and $1,0001, depending on the service provider, the position, and its requirements. If the recruitment process involves sponsored posts on social media platforms (which may not be suitable for all job profiles), the cost can be on the lower end, around $500. However, this does not account for the time invested by the in-house recruiter, who, with 1-3 years of experience, may earn between $22 and $25 per hour.

Let’s not forget that some businesses don’t have an HR department and a manager often plays that role, sometimes lacking time or experience for the recruitment process. Adding to the time and money it may take, a manager taking the HR role has a broader impact on the rest of the business: other departments needing sensitive approval from the manager, for example, will be considerably slowed in their own processes. Diluting a managing role is not a viable option. 

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The Role of Recruitment Agencies

If a company does not have an internal recruiter, they often turn to recruitment agencies. These agencies charge an average of 20-25% of the planned salary for the position, which, for a production employee earning an average of $40,000, can cost between $7000 and $8000. However, according to Robotiq’s HR specialists, if the company hires a certain quantity per year of the same job profile, the cost can be reduced to $2000-$3000 per hire. But let's be honest, even with price incentives, labor shortage is still an important challenge to face. 


What About the Job Requirements?

Let's make a brief aside here about the requirements announced in the listings of certain positions. Manual palletizing calls for, it goes without saying, some physical requirements. A person must be able to lift a certain weight to respond to the company’s needs. Let’s not forget that this heavy weight should be lifted repetitively throughout the person’s shift, putting this person at risk of injuries. 

Furthermore, candidates are often required to work at night or during weekends, making the work-life balance harder. If the hiring company doesn’t offer a very competitive social benefits package, it is fair to say candidates won’t be rushing to the door. 

It is also fair to say that with a job offer that doesn’t distinguish itself from the market by some outstanding benefits (social benefits, salary, working conditions, etc.), it may be difficult to engage and keep a newly hired employee. Then, the wheel of recruitment starts over again. 

See how Cascade Coffee lowered its turnover rate and increased its team morale with palletizing automation.

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What is the Cost of an Operator’s Injury?

Let’s say you are employing a few operators for manual palletizing. What is the impact on your business when one of them needs to take sick leave due to a back injury? First of all, there is a loss of productivity: if the operator is absent, their work needs to be covered by others or left undone. 

If other employees need to cover the injured operator’s work on overtime, the company would incur additional costs. Assuming an overtime rate of 1.5 times the regular pay, and if the operator’s work is covered for 4 hours per day over two weeks, this could cost around $1,2002.

If you need to hire temporary workers through an agency, the cost could be 30% higher than a regular worker, raising to about $2,0003 for a two-week period.

Let’s also mention the cost of a worker’s compensation for a back injury. The total amount can vary widely, but it is safe to say that a moderate claim for a back injury could cost a few thousand dollars, depending on the duration of the sick leave. 

Let’s not forget there are administrative costs linked to a worker’s injury. Managing the absence, the compensation claim, and finding a replacement staff is costly and very time-consuming.

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The Impact of Labour Shortage

Labor shortage leads to an increase in salary expectations. Candidates have the upper hand, but not all companies can afford to increase salaries for many reasons (factory modernization, increase in the cost of raw materials, etc.). Some companies even turn to international recruitment, which is complex, costly, and implies longer delays due to working permits, employee installation in the welcoming country, and so forth (up to six times longer for certain positions). 


The Time Factor in Recruitment

The average recruitment delay for a production position is between 20 to 45 days. During this time, the position remains vacant, leading to the operational loss mentioned earlier. It is thus crucial to allow the necessary energy and experience to a recruitment process. If you don’t, other companies looking to fill the same job profiles will!

 

Automating the Palletizing Process

Given the high costs, time, and other issues associated with employee turnover and recruitment, industrial companies should consider automating processes implying repetitive and injury-prone tasks where possible. One such process is palletizing. Automation can significantly reduce the need for manual labor, thereby reducing the impact of high turnover rates and the risk of injuries. It also increases efficiency, reduces the risk of errors, and can lead to significant long-term cost savings.

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Robotiq Palletizing Solution

Robotiq offers a Palletizing Solution responding to the needs of many industries. While it offers a permanent fix for all your staffing woes, it brings many other benefits. Safe and affordable, our Turnkey Solutions ensure end-of-line production continuity, a stress-free environment, more predictability, fast payback, and ROI. 

No matter their robotics knowledge, any individual can feel confident operating the solution as it is designed with the end user in mind. Eliminating no value-added, repetitive, and injury-prone tasks like palletizing, operators can then be reassigned to more technical and interesting, less risky, and better-paid positions, thus optimizing their engagement with your company. 


A transition for the future of your business

High turnover rates in industrial companies come with significant costs, both in terms of money and time. By automating processes like palletizing, companies can mitigate these costs, improve efficiency, and better engage their workforce. In an increasingly competitive market, such measures could be the key to maintaining a competitive edge.

Discover how palletizing robots propelled a US-based company to new heights of efficiency, productivity, and success. Watch the video.

Whan to know more about what palletizing robots can bring to your business? Connect with an expert to discuss your projects.

1.  Recruiting agencies offer competitive prices to post a job offer or for a head-hunting strategy. Prices can vary a lot depending on the job
position to fill: if the profile you are looking to fill is in high demand, the cost of the agency could increase significantly.
2.  This is calculated on an annual salary of $40,122.
3.  Always based on a $40,122 annual salary.

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Nicolas Lauzier
Written by Nicolas Lauzier
Senior Product Manager R&D
Connect with the writer:
http://www.robotiq.com

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