Understanding and Controlling Employee Turnover
A Review of Relevant Literature
Loris Raheem Pearson
HR Strategic Planning, Spring II 2009
May 21, 2009
Table of Contents
Cost of Employee Turnover
Investment in Human Capital
This research paper is an examination of literature surrounding the topic of employee turnover. I will attempt to show the relationship between benefits and trends in employee turnover. Evidence supports the fact that there is a statistical relationship between this correlation and employee turnover. This term paper also supports and further solidifies the concept that there is a direct correlation between total compensation and job satisfaction
A well-built body of research suggests that employee turnover is directly related to compensation and Job satisfaction. Job satisfaction is the feeling that an individual gets regarding their work and the nature of their job. This can be affected by the working conditions, supervisor-worker relationships, and compensation. While these are the some of the main categories, there are many subcategories that must be considered when discussing one’s overall feeling of job satisfaction. When people are satisfied with both their jobs and compensation packages they are less likely to contribute to the company’s employee turnover rate. The employee turnover rate refers to the movement of individuals out of a company or an organization. When Business leaders collaborate to devise the best possible work environment they should aim to cultivate the best overall compensation packages that will satisfy workers and inevitably reduce turnover rates.
Cost of Employee Turnover
There are a number of costly factors that will need to be considered when designing a compensation package that will reduce the company’s expenses and increase the ROI. The costs of separation may include but are not limited to the administrative process associated with the separation, separation/severance pay, and the possible unemployment compensation. The replacement costs incurred will include but are not limited to the following; attracting applicants, pre/post employment administrative expenses, medical exams, drug testing, training, etc. Reducing the employee turnover will reduce the company’s overall expenses and increase the company’s profit margins. This is why it is imperative for any forward-thinking company to solicit the expertise of qualified HR Professionals and I/O Psychologists to determine how the company can move forward with developing compensation packages that both attract the most talented individuals and captivate their talents. Managers should be aware of the costs of turnover and seek ways to retain employees. Retention of well trained employees will greatly reduce the personnel costs incurred when employees voluntarily quit their jobs. Keeping the same employees for long periods of time also give the company continuity and consistency. This will enable management to stabilize and anticipate production.
Sailors, J., & Sylvestre, J. (1994, March) says the following: The cost of employee turnover to U.S. companies has been estimated to be several billion dollars per year. These costs can be divided into two categories: visible and invisible (hidden) costs. Visible costs are those directly associated with the cost of employee turnover and account for about 20 percent of the total costs of employee turnover. Visible include the costs of recruiting and selecting new employees, advertising expenses, interviewing costs, and on-the-job training costs for the new employees. Invisible costs account for 80 percent or more of the total costs of employee turnover. These costs are not identified directly as costs of...
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