What Is the Real Cost of Employee Turnover

Topics: Costs, Employment, Variable cost Pages: 4 (976 words) Published: September 6, 2005
What Is the Real Cost Of Employee Turnover

The employee turnover rate and the retention of skilled employees is a major problem businesses face. "Conservative estimates put the cost of replacing a lost employee at 25 percent of the annual compensation amount. For the typical full time employee who earns $38,481 and receives $50,025 in total compensation, the total cost of turnover would amount to $12,506 per employee." This being the case employee turnover is a major cost and can significantly influence the bottom line so it should be avoided if possible. (Bliss)

"Employee turnover is a critical cost driver for American business. The cost of recruiting and filling vacancies, lost productivity from vacant jobs, and the costs of training new employees increase operating costs, reduce output, and cut into profits." (Orville 5-7)

Estimates of the costs of employee turnover vary widely and depend on whether all cost elements are recognized. The three primary elements of turnover cost include: •Staffing – sometimes called cost-per-hire include the costs of exit interviews, recruiting, job applications, screening applicants, relocation expenses and signing bonuses. •Vacancy – While a position is vacant, the productivity of the former employee is lost and the productivity of the overall organization is reduced, as remaining workers have to cope with being short-handed. •Training – No new employee starts work at 100 percent efficiency. The replacement employee's time, other employee's time and valuable resources must be expended to train each new employee and to facilitate the transitions.

So how do employers retain employees? Many employers try gimmicks, games, and prizes. F. Leigh Branham, author of Keeping the People Who Keep You in Business offers the following advice for retaining employees: •Don't always hire the best, but hire the "best fit".

•Have the insight to realize that no matter what the job not just anyone can do it...

Cited: Bliss, William. "Cost of Employee Turnover." The Adivsor. 11 Nov 2004
Branham, Leigh. Keeping the People Who Keep You in Business. : Amacom Books.
Javitch, David. "How Much Turnover is OK?." 01 2003. Entrepreneur.com. Entrepreneur.com. 01 Dec. 2004 .
McNally, Steven. "Turn Away Turnover." Security Services. September 2004: 16 - 19.
Orville, Wilbur. "Calculating the Cost of Work/Life Turnover." Workforce March 1997: 5-7
Unknown. "Employee Turnover - A Critical Human Resource Benchmark." hr Benchmarks December 2002: 20 – 23
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Employee Turnover Essay
  • Essay about Employee Turnover
  • Employee Turnover Essay
  • Employee Turnover Essay
  • Employee Turnover Essay
  • Essay on Employee Turnover
  • Employee Turnover Essay
  • The Cost of Turnover Essay

Become a StudyMode Member

Sign Up - It's Free