Assessing Turnover Costs

Numerous international and New Zealand based studies prove that the direct cost of just one unplanned exit falls somewhere between 1.5 times and 4 times the departing employee's salary.

Direct costs associated with ONE person leaving include:

ADMINISTRATION & PEOPLE COSTS

• Salary / wages of the person who fills in while the position is vacant

• Exit interview time of employee and Manager

• Administrative costs in preparing final pay

• Set up costs of new employee - including payroll, computer /security passwords, identification cards, business cards, telephones, email accounts, credit card accounts, cell phones, cars, pagers

• Manager's time spent in developing trust and building confidence in the new employee's work

• Severance / benefits continuation in some cases

• Personal Grievance costs - representation and settlement

• Possible loss of customers / clients that the employee may take with them 

• Disruption to the customer / client base managed by remaining employees

• Effect on the morale of remaining employees

• Absenteeism and burnout created by remaining employees having to work harder

LOST PRODUCTIVITY COSTS

• Reduced productivity levels of new employees - productivity is estimated on average to be only at 25% for the first 2-4 weeks, at 50% during weeks 5 - 12 and at 75% during weeks 13 -20

• Co-workers / supervisory lost productivity while bringing the new employee ‘up to speed'

• Costs of mistakes by the new employee while working at less than 100% productivity

• Project delay costs where the departing employee is a critical participant

• Cost of the Manager having to understand what work remains and how to cover that work until a replacement is sourced

• Loss of institutional knowledge, skills, contacts and Intellectual Property

TRAINING COSTS

• Investment of training in the departing employee - internal and external

• Orientation, training and induction of the new employee, their trainer and the materials 

• Departmental training time and materials

• Supervisory time in assigning, explaining and reviewing work assignments and output

RECRUITMENT COSTS

• External recruitment and selection costs - typically 15-20% of base salary plus advertising

• Internal recruiter time - typically from 30 hours to over 100 hours per position

• Recruitment administration time

• Travel and / or relocation costs to attract top candidates

• Selection panel preparation, interview and discussion time

• Health screens and qualification / educational checks

• Psychometric assessment - skills, abilities, aptitudes, values and behaviours