Turnover Calculator

The Truth About Turnover

We developed the Turnover Cost Calculator because we've learned that management doesn't always "get it" when the H.R. staff laments the cost of turnover but they tend to respond enthusiastically when they're faced with a dollar amount. And, to be honest, H. R. pros should be counted on to back up their arguments with facts and figures. 

Lest you think we inflated the true cost of employee turnover, our calculator reports costs averaged from several sources. The cost of turnover should include both direct and indirect costs, experts agree, and that's sometimes hard to track. Recruiting, advertising, interviewing and new-hire processing and orientation are often accounted for but there are others, such as pre-turnover (costs connected with a departing employee's slower work pace and absenteeism), severance pay, unemployment costs or litigation fees. 

Take a look at these figures we collected. 

• William M. Mercer's 1998 FAX Facts Survey on Employee Turnover shows that 55 percent of companies surveyed estimated the cost of turnover at $10,000 per person or less, but 10 percent calculated it at more than $40,000 per person.     
• Manchester Consulting 1998 retention study indicates that for any number of factors, including company revenue and number of employees, turnover costs are most likely to fall within the range of $1,000 to $10,000 per employee (65%). 10% of companies reported a cost in excess of $20,000.     
• American Hotel and Motel Association's 1997 U.S. Full-Service Deluxe & Luxury Hotel Benchmarking Study used well-known industry figures of $2,500 for direct and $1,600 indirect turnover costs per departing employee to calculate the average turnover cost of a hotel at $631,400.     
• The Saratoga Institute believes that an average turnover figure for companies is one times the cost of the employee's salary and benefits, varying widely depending on the industry.     
• A recent survey pegged the cost per new hire (acquisition cost only) using job fairs, print advertisement and other traditional methods at $3,295.

Client Example:

In a conversation with a new client trying to file a sales position for his construction company, the owner related his experience with a recent sales person and what it cost him.  He said he hired this person because he thought he could sell (gut feeling).  He employed him for six months ($20,000 salary).  He was in charge of the sale of a large project.  But because he didn't do a good job of selling the project, do good cost estimates and making promises he couldn't keep, the project lost $35,000 instead of making a profit.  That is a $55,000 turnover cost not even considering lost opportunities for other sales and other poorly planned projects.  That why the owner is now using our Sales Indicator and Profile Assessment to take his gut feeling out of the equation.

Client Example:

National-wide law firm did a 9-year lookback at turnover cost of attorneys.  Over that 9-year period, they lost 368 attorneys.  Some of these were associates and some were partners.  First, they discovered that only 4 out of 25 law school graduates made partner.  Many left after three years.  Second, using American Bar Association's estimate that an attorney's average turnover cost is $100,000, they estimated they lost about $37 million in attorney turnover cost!  They was their net profit for the previous year!  Needless to say, they have looked hard at their recruiting process and the culture that they have created at their firm.

Read why you should use pre-employment assessments to hire and reduce your turnover rates and costs.  Why Use Hiring Assessments?

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