In today’s economy it is more important than ever to avoid turnover. Turnover is extremely costly. These are the factors you need to consider when estimating what the bottom line is when it comes to calculating turnover.
First, there are separation costs. Staff time, including the departing employee, in conducting the exit interview and preparing COBRA paperwork where required. Consider payout of paid time off (vacation) due to the employee as well as possible unemployment costs.
Don’t forget interim costs until the employee is replaced such as temporary or contract workers as well as overtime for current employees who take up the workload. Morale often suffers if current employees are expected to pick up the slack for an extended period of time.
Recruitment costs really add up! Staff time to prepare advertisements or website postings. Costs of advertising. Employment agencies fees – can be up to 3% of employee’s slalary. Executive search firms are much more costly.
Your calculations should also include staff time in:
- Screening resumes and conducting telephone interviews
- Contacting candidates and scheduling interviews. The more people involved the more time consuming this becomes
- Interview costs – don’t forget to calculate the number of people involved in the process times their hourly rate.
- Making the final decision – may inlcude a second or even third round of interviews
- Conducting pre-employment testing
- Background checks and preparation of pre-employment paperwork.
Post employemnt costs include:
- Physicals and drug screening
- Orientation costs
- External seminars/training to bring the employee on board successfully
- Time new employee spends getting to know the basics of his/her new job. These costs are no small matter for managerial level employees or other jobs requiring highly skilled or technical employees
- Time managers and supervisors spend in training and coaching
Some costs are difficult to calculate. For example, how does one put a dollar figure on what it costs the company when a long-time employee who has great rapport with the company’s best customers leaves the organization? Not so easy, is it?
Here are some tips to avoid turnover
Take the time to hire the right person.
Make sure employees are properly oriented and welcomed into your company.
Train your supervisors in all areas of employee relations:
All policies and procedures enforced fairly
Employees treated with respect without intimidation or bullying
Select supervisors for their leadership and interpersonal skills
Salaries and benefits should be competitive.
Employees should be properly trained and offered opportunities for advancement whenever possible.
You can get more information on employee selection and retention by visiting our website.
Mary Ann says
What a timely article! I was just in on a webinar about this today. This is exactly why we include things like separation checklists and on-boarding guides in our HRMS. You have to be organized and on top of costs and methodology both as employees are on the way in and out. So many problems (and so much money)can be avoided if you hire the right people and retain them whether than worrying about how to get replace them later.
Marie Adams says
Training is the key here, and on both sides of the table, like you pointed out. Make sure managers/supervisors are trained to handle employee relations and ensure that new employees gain the proper training to do their job as well as advance within the company. Help people succeed with training and they’ll give back to your business in outstanding work. Great post!
employee hiring says
This is really great information. Thanks for posting 🙂
Great article. I’ve seen numbers thrown around like 2.5x to 14x the cost of salary+benefits depending on the position. If a company is experiencing a lot of turnover, it is critical to figure out the root cause(s). It may be their hiring process or something about the work environment. Either way, it is too costly not to fix.
After reading this article, now I already have a clear idea about the costing of such employee turnovers. Though it is still hard to calculate, at least we have a picture on how it works and how we can avoid it.
Great article! These will help employers as well as entrepreneurs minimized turn-over rate which is definitely costly.
John Schmidt says
I get the philosophy, but you never answer the question you ask in your title. What does it cost? Since you cannot provide the specifics for a business, averages by geography would make sense and represent a valuable piece of information for the readers.