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There are many opinions regarding employee turnover. Some believe it is an inevitable fact of doing business. Others say that turnover is a symptom that indicates deeper organizational problems are present.
One thing is for sure — turnover costs a company. How much? Well, you may be surprised. The Department of Labor publishes a worksheet (www.dol.gov/cfbci/turnover.htm) that helps employers get an idea of how much it costs to replace an employee who leaves your organization. Once a company realizes the true cost of turnover, it can take steps necessary to stem the turnover tide.
Following is the worksheet published by the Department of Labor. Take a few minutes to fill it out. You might be surprised to see the true cost of employee turnover.
ESSENTIAL DATA
Employee's classification: _____________
Employee's hourly pay rate:___________
Employee's supervisor pay rate:_______
Corporate office staff pay rate (may be an average): ___________
| HARD COSTS | |
| Pre-Departure | |
| Separation processing | |
Administrative time
Hours _____
x Wages $_____ |
| = $________ |
| Vacancy Costs | |
| Coworker burden | |
Overtime; Added shifts
Hours _____
x Wages $_____ | |
| = $________ |
Hiring search firm or temp. agency
Hours _____
x Wages $_____ | |
| = $________ |
Developing advertisement(s)
Administrative time
Hours _____
x Wages $_____ | |
| = $________ |
Placing advertisement
Cost of advertising space(s)
Hours _____
x Wages $_____ | |
| = $________ |
| Selection and Sign-On | |
Interviewing
Hours _____
x Wages $_____ | |
| = $________ |
Reference checking
Hours _____
x Wages $_____ | |
| = $________ |
Drug testing/psychological testing
Hours _____
x Wages $_____ | |
| = $________ |
Orientation & OJT
Hours _____
x Wages $_____ | |
| = $________ |
| Total "Hard Costs" of Turnover | |
| = $________ |
| SOFT COSTS |
Pre-Departure
Lost productivity of departing employee
Exiting employee performance at 50%-75%
Hours _____
x Wages $_____ | |
| = $________ |
Lost productivity of co-workers
Hours _____
x Wages $_____ | |
| = $________ |
Increased time discussing departure and organizational conditions
Increased workload for employees
Hours _____
x Wages $_____ | |
| = $________ |
Lost productivity of supervisor
Hours _____
x Wages $_____ |
| = $________ |
| During Vacancy |
| Lost productivity of vacant position |
Overtime
Added shifts
Hours _____
x Wages $_____ |
| = $________ |
Lost productivity of supervisor
Time spent filling in
Hours _____
x Wages $_____ | |
| = $________ |
Recruiting administration
Supervisor's time with Schedule changes/overtime
Hours _____
x Wages $_____ | |
| = $________ |
| Selection and Sign-On | |
Lost productivity during training
Replacement requires Support/direction
Hours _____
x Wages $_____ |
| = $________ |
Lost productivity of co-workers
Existing employees distracted
Hours _____
x Wages $_____ | |
| = $________ |
Lost productivity of supervisor
Hours _____
x Wages $_____ | |
| = $________ |
| Total "Soft Costs" of Turnover | |
| = $________ |
| TOTAL COST OF TURNING OVER ONE EMPLOYEE |
| Hard Costs + Soft Costs | |
| = $________ |
| FORMULA FOR ANNUAL TURNOVER COST |
Number of exiting employees ________
x cost of turnover
(hard + soft) $_________ | |
| = $________ |
author: By Joe Escobar