The High Cost of Turnover

August 6, 2008 8:01 am RSS Feed Icon Change Management

Turnover issues can affect your companys profitability, customer loyalty, sales, productivity, and employee morale. Below are examples of turnover costs from some reliable sources:

  • 1/3 of a new hires annual salary or wage Department of Labor

  • Nonprofessional position - 1.5 times the persons annual salary
Professional position - 2.4 times the persons annual salary Rutgers University - Graduate School of Business

  • $500 for a fast food employee HR Focus
$3,000 - 5,000 to replace a truck driver HR Focus $2,000 teller position Credit Union Magazine

  • 38% of an employees annual salary U.S. Chamber of Commerce (average for all jobs)
There are many ways to calculate turnover cost. For example, one St. Louis photocopier company figures their first year cost to hire and train a new repair person is in excess of $63,000. Their turnover cost figure includes these tangible and intangible expenses.

Tangible Costs(Easily identified)
Advertising cost for open position

Recruiting agency fee

Travel expense

Interviewer (s) time First interview

Interviewer (s) time Second interview

Training cost for new hire

Relocation expense

Temp-to-permanent fee

Hiring bonus

Exit interview cost

Administration costs for termination

Severance/separation costs

Unemployment compensation

Intangible Costs(More difficult to assign a cost figure)
New employee productivity costs associated with the learning curve
Management time that could have been used elsewhere
Loss productivity for existing employees who are filling in for the open position
Employees stress & conflict while the position is open
Customer needs not being met
Missed business opportunities

The copier companys managers understand the cost implications of their hiring and promotion decisions. For that reason they have developed a systematic approach for making those decisions.

Would your managers change their process if their decisions impacted their budget by $63,000? We help companies reduce turnover costs and/or develop a systematic approach to their hiring and promotion decisions. We will positively impact your bottom line. Please give us a call 314-664-6110.

Hire Your Companys Future!

John Bishop, a graduate of Babson College in Boston, has over twenty-five years experience in sales and sales management. He has owned two companies and developed sales organizations in the United States, Europe and Japan. He founded Accent on Success in 1994 to help companies hire and promote the right people for the right positions.

In addition, Mr. Bishop is the Executive Director of a nonprofit organization he founded that is dedicated to helping teenagers succeed in school and in life. Mr. Bishop and his wife Carole have been married for over twenty-five years. They have two daughters, three grandchildren and one great-grandchild and live in St. Louis, Missouri.

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