What Kind of Expense Is Employee Turnover?

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A certain degree of employee turnover is to be expected in any type of business with a lot of workers. Learn about what kind of expense employee turnover happens to be with help from an accomplished attorney, author and speaker in this free video clip.

Part of the Video Series: Human Resource Tools
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Video Transcript

Welcome, this is Don Phin, HR expert and President of The Amazing HR That Works Program. Today we're going to talk about what kind of expense is employee turnover and of course, it's a very big expense. I've seen a lot of surveys that say that there's been a pent up demand in a sense by employees that work other places and recessions kind of come to an end and now people are looking for greener pastures. Again I've seen anyplace from 25% of employees to 50% of employees looking to move on to other workplaces. I always kind of kid where is that half going to move to where the other half is leaving but the reality is that exchange always happens in the marketplace and some employers win it and some employers lose it and one of the things you'll want to understand is what the cost of it is so you'll know where you can allocate resources so you understand the ROI of having good retention practices. So with all of that I put together this little list of some of the costs that are associated with it and of course there's the separation cost you know, people that are not performing for the last month that they're there because they know that they're going to split the place because they're fighting with management. So those costs are very high. Then you've got the vacancy cost, nobody is doing their job at all right now and to replace them with somebody else. Then you've got the cost of hires which depending on your environment can be very expensive, then you've got training costs, okay of getting them up to speed. You've got the soft costs, let's say they file a lawsuit, they take clients with them, they take employees with them. You know turnover can be very contagious, you get one person on a lead on a project, he might take the whole team with him to work someplace else. So it can be very expensive there. I ran a forum for senior HR executives for many years and one of the things we tackled was turnover. I'm going to show you a tool you can use in a minute but we had 18 people go back and say what it would cost to replace a $50,000 employee and the figure came back, $54,000 to replace a $50,000 employee. Having run these numbers for many years you can figure the 1 to 1 ratio is about 1 to 1 in $50,000. So if somebody is more expensive, there's a greater ratio, if they're less expensive there's a lesser ratio and you want to really turn these things into revenue equivalencies when you talk to management because they're more concerned about top of the line and bottom of the line. So this is Don Phin talking to you about the cost of turnover. Take care.

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