Employee Turnover Costs: How Much Is It and How Is It Calculated?

Posted August 14, 2016

Every business thrives according to the strength of its staff. The happier, smarter, and more efficient your workers are, the better your goods and services can be.

However, there are times when staff leaves for various reasons. Some move away, others decide to return to school.

When that happens, you need to replace them, and that costs money. Not only do you lose productivity, but you need to find a suitable replacement and then train them.

Keep reading to learn more about employee turnover costs how to calculate that cost. In this blog post, the following topics will be discussed:

Replacement Costs
Separation Costs
Reduce Turnover

Replacement Costs

Replacement costs for employees is a budget item that you might not be considering. However, these costs can be significant and may even have a material impact on your quarterly numbers.

You can begin to assess replacement costs by determining certain aspects of the process such as: the hourly rate of the person(s) conducting the interviews, the amount of time your staff will spend reviewing resumes and applications, and the cost of training a new employee.

If you intend to use a recruiter to find top talent, make space in your budget for their retainer fee or their commission structure. Then weigh the costs against the salary of your new staff member.

Separation Costs

Not only does replacing an employee cost money, but their separation can cost money, too.

Under the best circumstances, employees will give notice and allow you to find their replacement before they leave. While this may keep your operations moving smoothly, you will incur the cost of replacement and then pay to train the new employee.

If, however, there is a gap between the departure of the outgoing employee and their replacement, you may have to pay overtime for employees who must pick up the slack from the outgoing person. Furthermore, there may be severance packages involved, in case you have to relieve an employee.

Reduce Turnover

To avoid these costs, it’s ideal to reduce employee turnover rates.

You can do this with ample compensation packages, robust benefits, and by affording your employees the respect they crave.

In fact, employee morale is most positively impacted by respect. Respect can be cultivated by encouraging kind and supportive language in the workplace, taking a personal interest in employees, and even simple team-building events such as a dinner out or some friendly inter-office competitions.

You can even enhance your benefits package with something as simple as an employee discount package. These programs provide savings to your employees on all sorts of goods and services. Surely, your employees will be thankful about this.

The upfront cost to you is minimal, but if you can reduce turnover rates and their attendant costs, your company will benefit for years.

About Rush Recruiting & HR

If you are seeking an outsourced human resources firm for all of your HR needs, contact Rush Recruiting & HR.

From HR consulting to providing the corporate training and orientation materials necessary to succeed, our team is here to help!

Lori Rush

Lori Rush is the founder and President of Rush Recruiting & HR. In addition to having over 20 years of experience and being certified in STAR behavioral interview techniques, Lori is an active member of the Home Builder's Association (HBA) and Oregon State University Alumni Association Board of Directors.