Dreaming of an Eagle Bay holiday shack? Or a 5 star world cruise? Or maybe just a new pair of Manolo Blahniks? Is staff turnover costing you that dream….?
What does it actually cost you – in dollars – each time a person leaves your organisation?
Although there is no silver bullet for measuring the cost of employee turnover and estimates vary wildly from 30% of annual salary for entry level employees up to a staggering 400% for highly specialised staff, the below calculator gives a good indication. Remember that some factors will be hard to quantify (e.g. Productivity differential) so attempt a conservative best guess rather than spend hours calculating an exact figure.
Considerations
Despite the exhaustive appearance of the above calculator there are still indirect costs that are too difficult to estimate for the purposes of the exercise – for example consider the potential impact of new employees on client satisfaction and retention, the ripple effect that turnover has on your existing staff productivity or the impact that turnover may have on your employer brand.
Indeed, as a considerable amount of effort can go in to calculating these costs, PwC1 suggest that over time businesses develop a rule of thumb based on their previous results (e.g. each ‘average’ performing employee costs $50,000 or a ‘high performing’ employee costs $100,000), and present costs as an absolute value, e.g. turnover cost us $300,000 for the year.
Of course, not all turnovers are bad – although they will all have a cost attached, the long term benefits of turning over under-performing staff should not be ignored for the short term dollar saving.
Why is this important?
As you can see from the above calculator these costs can add up very quickly – multiply this by the number of staff turning over each year and that’s a considerable number coming off the bottom line. (The Society for Human Resource Management benchmark the average annual staff turnover – measured as Resignations + Retirements + Involuntary Terminations / Headcount – across all industries in Australia at 15%) Tracking the dollar cost of staff turnover will help you assess the effectiveness of your retention strategies which in turn, if effective, will decrease the impact staff turnover is having on your business’s overall performance.
Not to mention that the shack/cruise/Manolos become that much closer!
1. http://www.pwc.com/en_US/us/hr-saratoga/assets/saratoga-improving-retention.pdf