Quick And Simple Steps To Quantify Your Turnover Costs

Quick And Simple Steps To Quantify Your Turnover Costs

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Hypothetically, let's assume that you have a Customer Service
Representative who earns an annual salary of $35,000. She gives you two weeks' notice of her intended departure (and typically isn't very productive during those last two weeks). You create the job posting and advertise for about a month. Then you conduct interviews that take two weeks of your time and effort. Finally you find a good applicant and extend a job offer that's accepted, and your new hire wants to give her current employer two weeks' notice. From beginning to end of the recruiting process, you've had a vacant job for 6-8 weeks at a minimum.

To cost out the turnover expense in our example:

CSR gives you two weeks' notice, but stops working.............................$1,346

Cost of temp to fill job for two months..................................................................................................... $5,833

Advertising costs.........................................................................................$200

Use of a recruiter to fill job (20% of new base salary of $37K referral fee)...........................................................................................................$7,400

You have to pay the new hire $2,000 more..........................................$2,000

Total, rounded up...................................................................................$16,780

You can also quantify and add your time & effort, the loss of production from having one less employee in the Customer Service Department, the cost of training your new hire and the resulting stress other employees experienced from the additional workload. Even without the headhunter expense, you're approaching $10,000 in costs to replace this employee.

You may have also spent considerable time on an involuntary separation depending on the situation, and separation pay if it was involved. And of course, your Company's unemployment costs increase due to higher claims.

You can see how it easily adds up. Just walk through a recent employee termination and quantify the costs of each step to develop an approximate number for benchmarking. Then multiply that number by the number of turnover in each job classification to reach your annualized cost.

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Becky Regan, M.A., CCP began her own consulting practice in 1995, Regan HR, Inc. to provide human resources consulting services to businesses in California. She has been successful in growing her business through reputation and client referrals. Her work as a consultant includes the full spectrum of HR technical expertise, including C-level recruitment, compensation studies (design, market and executive pay studies, sales compensation plans), training & teaching, interim assignments as a HR Director for organizations, and employee relations, including workplace investigations and written responses to formal complaints. For more HR tips and to receive my FREE "The Top 5 Secrets to Building a Better Organization that Every HR Pro Must Know" go to www.ReganHR.com.