The Cost of Employee Turnover

October 1999
by William G. Bliss

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This article consists of a comprehensive checklist of items to include when calculating the cost of employee turnover in any
organization. To determine the expense, have the hourly and weekly fully loaded payroll costs (i.e. salary plus benefits) of the
departing employee, as well as that of the management staff, recruitment personnel, and others as mentioned below.

It should be noted that the costs of time and lost productivity are no less important or real than the costs associated with
paying cash to vendors for services such as advertising or temporary staff. These are all very real for the employer.

You may be surprised to learn that the calculations can easily reach 150% of the employee’s annual compensation figure. The
cost will be significantly higher (200% to 250% of annual compensation) for managerial and sales positions.

To put this into perspective, let’s assume the average salary of employees in a given company is $50,000 per year. Taking the
cost of turnover at 150% of salary, the expense would then be $75,000 per departing employee. For the mid-sized company of 1,000
employees that has a 10% annual rate of turnover, the annual total is $7.5 million!

Do you know any CEO who would not want to add $7.5 million to their revenue? As you can see, there’s value in keeping
employees on staff. And by the way, most of that figure would be carried over to the profit line. What about the company with
10,000 employees? At the same 10% turnover rate, the sum w…IBPA Members – Click here to view the full article (login required).

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