This article provides estimates of turnover costs for various groups of employees, and details the various factors that influence the total turnover figure.
Employee turnover is far more expensive than most people realise.
In the worst case scenarios the loss of a single individual can put at risk a major project, with implications for the long term viability of the company.
Many firms are underestimating the total cost of employee turnover by simply considering the more visible costs, such as the cost of finding a replacement, while ignoring many of the negative consequences of turnover and their associated costs.
Calculating The Cost Of Turnover
There are two types of costs of involved in employee turnover: visible costs and invisible costs.
Looking at some of these in more detail: Recruitment costs include the cost of advertising, the cost of the interview process including any psychometric testing and assessment centres, candidate travel costs, golden handshakes and relocation costs where applicable.
Invisible or hidden costs:
Disruption to fellow employees
Damage to morale
Missed business oppportunities
Lost productivity until new employee is up to speed
Damage to business relationships
Loss of knowledge, skills and expertise
Impact on reputation
Disruption to social and communication networks
Some of these hidden costs are more difficult to calculate and may need to be estimated using expert studies.
If attempting to calculating the total cost of turnover yourself, you will need to speak to a variety of relevant people. These will normally include the recruitment manager, training manager, customer relations manager and departmental manager. It may also be appropriate to speak to customers and clients to get a sense of their perspective.