The High Cost of Employee Turnover

Employee turnover can be a benefit and a problem.

Is turnover the Cost of Doing Business?
All organizations contend with some amount of turnover. In many industries, high turnover may be accepted as simply the “cost of doing business,” although this cost may often be much higher than one would suspect.

What does turnover cost?
Turnover has been estimated to cost between 10 and 20 times the employee’s weekly wage. Wal-Mart currently says that turnover costs them an average of $2,500 for each employee replaced. It can be five times that for more skilled workers.

What factors should be considered?
The following factors should be considered when examining the cost of turnover.

• Recruitment costs, including newspaper advertising, employment agency fees, and interviewing time.
• A greater number, or severity, of accidents and related increases in worker’s compensation rates due to inexperienced employees.
• Increase training costs.
• Increased unemployment insurance rates.
• Diminished product quality
• Loss of productivity while the position is vacant and while the new employee is learning the job.
• Decreased customer service, public relations, and credibility
• Decreased employee morale
• Increased administrative expenses (payroll, insurance benefits, employee orientations, etc.)

Is All Turnover Bad?
Although the cost of turnover can be significant, it is important to keep in mind that not all turnover is bad. Organizations with no turnover run the risk of becoming stagnant by not hiring new people to bring fresh ideas and techniques to the organization. Some turnover is healthy to the overall growth of an organization. The challenge for employers is to determine a level of turnover that provides the necessary influx of ideas at a cost that is manageable and acceptable.

Ron Rael Leadership Provocateur, is a keynote speaker, consultant, and author.

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