Stacks of dollar bills to symbolize the costs of turnover. affirmative-action-consultingEmployee departures cost time, money, and other resources. Research suggests that direct replacement costs can reach as high as 50%-60% of an employee’s annual salary, with total costs associated with turnover ranging from 90% to 200% of annual salary, (Society for Human Resource Management). As an employer or human resource manager it is important to understand what the cost of turnover is at your company.The cost of turnover comes in many forms, a few of which are listed below. The list is not all-inclusive and we recommend using these costs as a starting point to create your own picture of how much turnover costs your company.

Costs associated with Turnover:

Financial


  • HR staff time (exit interview, payroll administration, benefits)
  • Manager’s time (retention attempts, exit interview)
  • Accrued paid time off (vacation, sick pay)
  • Temporary coverage (contingent employee, overtime for remaining employees)

Other


  • Delays in production and customer service; decreases in product or service quality
  • Lost clients
  • Clients not acquired that would have been acquired if employee had stayed
  • Contagion (other employees decide to leave; for example, to join defector at his/her new organization)
  • Disruptions to team-based work
  • Loss of workforce diversity

Replacement Costs

  • New hire’s compensation
  • Hiring inducements (signing bonus, reimbursement of relocation expenses, perks)
  • Hiring manager and unit/department employee time o Orientation program time and materials
o HR staff induction costs (payroll, benefits enrollment)

Training Costs

  • Formal training (trainee and instruction time, materials, equipment)
  • On-the-job training (supervisor and employee time)
o Mentoring (mentor’s time)
  • Socialization (other employees’ time, travel)
  • Productivity loss until replacement has mastered job

Understanding turnover costs can help your company make changes from the ground up and cut costs down. It is also clear that human resources and managers alike will need to change current practices from the recruitment and selection process, employee on-boarding, mentoring programs, employee and manager performance reviews, compensation, and employee engagement in order to correct current turnover rates.As a federal contractor these costs can go a step further, if you have an issue in your turnover due to discrimination practices and your company is audited by the OFCCP, you could find your company paying a large settlement. Consult with an affirmative action expert to review your data and identify any potential risk areas. Career Resources is here to answer your questions: info@crincorporated.com