Calculating Employee Turnover Cost

Employee turnover is an inevitable part of an Organization. Also, it is undeniable that when an employee leaves the company, organizations usually experiences substantial costs. Costs may include decreased productivity, costs of hiring new employee, increased training time and other indirect costs.

However, most of the organizations are still hesitating to calculate the employee turnover costs. Instead, they are devoting a greater time for tracking the leave reasons.

Turnover reasons are also important factors for improving the internal conditions, systems and processes. These are valuable resources and on my previous writings on employee turnover, I have pointed out the critical importance in more detail! .

This time I would like to draw your attention to a much more untouched part of the topic, COSTS...

Which cost?..

There is a lot of research in the literature focusing on the psychological and and organizational determinants of tunover. Cost side of the subject has been treated as subjective. Components of the cost are more or less commonly described in the literature, but you seldomly reach to an information explaining what is the percentage to annual base salary for specific job groups.

Cost vary as I explained above. Different cost elements tha! t I would like to emphasize and which are basis on the followi! ng cost percentages are;
1- Exit cost of previous employee
2- Recruitment Cost
3- Employee Cost
4- Orientation Cost
5- Training Cost
6- Lost productivity
7- Quality problems
8- Customer dissatisaction
9- Loss of expertise
10-Temporary replacement costs

As you can see you have to spend a lot of time for tracking all these cost elements.
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I'd like to share with you a turnover costs summary mainly sourced from Jack Phillips Center for Research. The study puts turnover cost ranges as percentage of annual base salary for different job types and categories:

Entry level-non skilled worker ; 30 - 50%
Service/Production worker; 40 - 70%
Skilled Hourly; 75 - 100%
Clerical/Administrative; 50 - 80%
Professional ; 75 - 125%
Technical ; 100 - 150%
IT Specialist; 200 - 400%
Supervisor ; 100 - 150%Department Manager; 125 - 200%

HR should report and draw senior management's attention to turnover issues especially voluntary leaves from the organization. When you calculate according to above mentioned percentages, you will realize what can turnover cost to you.

Calculate percentages