Very quickly I would like to acknowledge the contribution of Collin Brown on this topic.
However just to re-cap some of the costs of Employee Turnover would include but not limited to the following:
Cost of Administering Resignation
Cost of Covering during the Vacancy Period, especsially if relief officer has to come from a branch of the Company
Administration of the Recruitment and Selection Process-tests etal
Induction Training for the new employee/s
Cost of Training-relevant seminars-fast-track courses etal
Cost of Employment itself-official car +driver, the package depending on the status
Legal or Cost of Litigation-this comes to mind depending on the nature of exist by erstwhile Employee to be replaced
Above many of these costs consists of Management or Administrative staff time but direct costs can also be substantial where advertisements, agencies, or assessment centre are used in the recruitment process.
From Nigeria, Lagos
Hourly rate for vacant position
Hourly rate for person who fills in
Hourly rate for the vacant position's supervisor
Hourly rate for the vacant position's manager
Hourly rate for the vacant position's director
Hourly rate for the Internal Recruiter
Hourly rate for Internal Recruiter's Assistant
Hourly rate for hiring department's staff
Hourly rate for orientation personnel
Hourly rate for training personnel
Number of weeks the person fills-in
Lost productivity of fill in person ( 0.00 to 1.00 )
Cost of a formal exit interview
Hrs by mgr. to understand what work remains.
Hrs by mgr. to conduct separate exit interview.
Cost of training ee by company personnel
Cost of training ee by ext. programs...inst.
Licenses...certifications paid for by the company
Depart. Prod. lost because the person is leaving.
Cost of depart. staff discussing reactions….
No. of weeks departing ee has lower perf.
Departing employees' lower perf. (0.0 to 1.0 )
No. of ees who go with departing employee
Average cost of losing these departing ees
Dollar cost of disrupting the team
Cost of severance package
Cost of benefits provided to employee
Value of lost knowledge, skills and contacts
Years of service
Annual premium (0 to 1.0 )
Increased unemployment insurance premiums
Cost of time spent to prepare for unemp. hearing
Cost of third party to process unemp. claim
Cost of lost customers
Cost to retain the customers that want to leave
Number of weeks the position stays vacant
Advertising (classifieds and display ads)
Agency fee (@ 20 - 30% of annual compensation)
Employee referral …
Internet posting (e.g., $300 - $500 per listing.)
Number of Internet postings
Internal recruiter's time (min. of 30 to 100+ hrs...)
Recruiter's assistant's time (a minimum of 20 hours)
All Other staff hours
Admin. cost/resume (handling/processing/respndng)
Average number of resumes processed
Hours spent interviewing internal candidates
Hours by internal candidates in interviewing
Criminal background checks
Other reference checks
Number per position filled…
Number of applicants tested per position filled
Job Fit Assessment…
Hours new employee spends in orientation
Hours spent by orientation personnel
Department training development and delivery
Hours in training by new employee
Hours of training (design and delivery)
Other equipment costs
Hours by supervisor
Weeks at a 75% lost rate (Use 2 , 3 or 4 )
Weeks at 50% loss rate (Use 1 to 8 )
Weeks at 25% loss rate (Use 1 to 8 )
Hours by supervisor (over a 5 month period)
Total hours of coworkers (over a 5 month period)
Cost of mistakes by new ee…
Cost of lost management time (opportunity costs)
Non-completion or delivery of a critical project...
Manager's lost productivity (hrs) by losing key staffer
Director's lost productivity (hrs) by losing key staffer
To put the person on the payroll
To secure computer and security passwords
Identification and business cards
Internal and external publicity announcements
Tel. hookups and establishing email accounts
Establishing credit card accounts
Leasing equipment (...cell phones, automobiles, etc.)
Hours Manager needs to develop trust, etc.
Company Revenue (budgeted)
Number of sales people
Weeks in budget
Weeks at a 25% Productivity Rate (1, 2 , 3, 4 or more)
Weeks at a 50% Productivity Rate (Use 1 to 8 or more)
Weeks at a 75% Productivity Rate (Use 1 to 8 or more)
Number of employees
Weeks position is vacant
Profits as a percent of sales
Losing a person in a key or critical job.
Competitors seeker more employees or customers.
Competitor may learn business secrets and ideas.
"We don't care" so they and look for new supplier.
"We are going down hill…"
The following is the data used for Dr. John Sullivan's recommended method for evaluating each manager's turnover rate. If a manager loses foog employees that is bad, if the manager loses bad employees that is good. Similar turnover rates may not mean the same thing.
Type 1 - Top Performer Weighting Factor
Type 2 - Average Performer Weighting Factor
Type 3 - Bottom Performer Weighting Factor
Performance Appraisal Rating for Type 1
Performance Appraisal Rating for Type 2
Performance Appraisal Rating for Type 3
Number of Type 1 employees that left
Number of Type 2 employees that left
Number of Type 3 employees that left
Percent of salary to cover benefits)
From United States, Chelsea
It would great if you can cite a live example for calculating a turnover cost for a software engineer. There are several articles and boards which states and mentions the method to calculate, the problem lies in a live implementation of the equation.
>It would great if you can cite a live example for
calculating a turnover cost for a software engineer.<
The cost to replace an employee at one employer will be different from the cost to replace one employee at another employer. Employers need to calculate their own cost to replace and do so for each employee.
> There are several articles and boards which states and mentions the method to calculate, the problem lies in a live implementation of the equation.<
The list I presented above comes from our "Business Cost and Impacts of Turnover" Excel workbook which we sell. If you want a free workbook to estimate the cost of replacing employees, visit my free download web page at http://tinyurl.com/dvlta and download "Free Download No. 4: Cost of Turnover Workbook".
From United States, Chelsea
But still what's good way to reduce these head overs on companies to hurt them minimum ?
At least first common procedures can be generalized across Industry Standard like P-CMM are common place in IT and may carry the experience baggage in resume categorily and cost can be shared and companies have quantity data as well to add to their balance sheet.
From India, Delhi
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