July 13, 2024

Paull Ank Ford

Business Think different

Turnover Cost Business Huge Dollars Every Year and Hurts Talent Acquisition and Retention

Turnover Cost Business Huge Dollars Every Year and Hurts Talent Acquisition and Retention

One of the most overlooked financial impacts in business today is the cost of turnover. Very few companies track the true cost of employee turnover and it is very hard to understand why not.

Replacing one person in a role that makes $30,000 dollars per year will actually cost the company $49,487 ($10,487 in lost productivity alone!).

Below are the typical expenses for rehiring a $30,000 dollar a year job:

Employee salary. Actual salary plus benefits $39,000.

Intangible Loss of Productivity. This includes other employees covering the vacant job duties and is estimated to be 12% of the vacant job salary. The average number of days to hire someone is 56. In our example, the intangible loss of productivity is $858 (12% Salary/235 working days per year times the number of days the job is vacant).

Hiring Managers Intangible Loss of Productivity. The common hiring process takes up to 10 hours of management time to review resume’s and interview potential candidates. In our example, we have assumed that the average salary of the hiring managers is $55,000 and therefore equals $293 ($55000/1880 hours worked yearly times 10).

Intangible Training Cost. You have to train the new employee. We have assumed that the average salary of the hiring manager and other coworkers that train the individual in this case equals $43,000 and it will take 3 hours per day for 60 working days to thoroughly train and as a result equals $4,117 ($43,000/1880 hours worked yearly times 180 training hours).

Intangible Days to Productivity. The industry standard for a new employee to be up to speed is 60 working days but we will presume the individual is at least 50% productive and hence will cost the company $4,979 until they reach their full potential. ($39,000/235 working day per year times 30 working days).

Talent Acquisition. Acquiring talent requires a direct cost to the business in terms of advertising, job posting, job boards, etc… In this example, we have used a flat fee of $240.

How much turnover did your company have last year? The monetary amount the company spent on turnover can be mindboggling. Using the very conservative numbers from above, it is clearly beneficial for an organization to create an work environment that is family and team oriented with outstanding benefits that go beyond salary in order to retain their most treasured assets; the employees.