Employee Turnover

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) $_________

= $________