![]() ![]() ![]() Our sample calculation is based on a business with 50 employees and 20% annualised employee turnover – 10 resignations per year. = Total cost of employee turnover HERE’S AN EXAMPLE SCENARIO:Ĭonsider the following sample calculation. The total cost of turnover of one employee is as follows: SUMMARY: CALCULATING YOUR TOTAL EMPLOYEE TURNOVER COSTS On the other hand, there may be some offsetting cost savings while the vacancy remains unfilled.įrom the above costs you should deduct the employee’s remuneration for the number of days the job remains vacant. OFFSET – UNPAID COSTS WHILE JOB IS VACANT: changes in production or sales figures), but many will not. Again, some estimates will be quantifiable (e.g. To calculate this cost, you could attempt to estimate percentage loss of productivity based on your observations of past employees who resigned, and multiply the percentage by the employee’s daily total remuneration rate. There will also be time taken with exit interviews, farewell parties, etc. This is harder to estimate, but the productivity of many (but not all) employees deteriorates while they are serving out their notice period.įor example, many are preoccupied with making new arrangements relating to a new job, and some attempt to ‘square the account’ if they have untaken sick leave or rostered days off owing to them. LOSS OF PRODUCTIVITY IN FINAL STAGES OF EMPLOYMENT: Some estimates will be quantifiable (e.g. Using an estimate of 50% productivity until the required standard is reached, estimate the number of days required to reach 100% productivity multiplied by 50% of the employee’s daily total remuneration rate. ![]() The time period varies according to the job content and employee. New employees normally take some time before they become sufficiently familiar with their jobs to achieve 100% productivity. LOSS OF PRODUCTIVITY IN EARLY STAGES OF EMPLOYMENT: Miscellaneous administrative tasks such as closing off computer access.Time required for employee and line manager to complete paperwork, return and check employer’s property (such as security tags, vehicles, tools, uniforms, sales resources, etc.).Pay Officers’ time to process termination pay.Cost of training/induction resources and facilities, on a per employee basis.Remuneration of employees involved in training and induction processes, eg trainers, line managers, ‘buddies’.The amount of time spent verifying CV contents (eg qualifications), checking references, conducting tests, etc.The amount of time spent attending interviews and debriefing afterwards (include the time of each interview panel member).The amount of work time spent on screening applications and processing rejections.The amount of work time each of the above spends on the process.HR/recruitment staff line managers administrative staff who make appointments, prepare and place advertisements, liaise with consultants, etc. Remuneration of employees involved in recruitment/screening/selection processes, e.g.Where other employees perform part of the vacant job as well as their own jobs, use an estimate of one-third of each employee’s total remuneration cost. LOSS OF PRODUCTIVITY FROM OTHER EMPLOYEES FILLING IN FOR VACANT POSITION: The following is a list of broad factors that need to be taken into consideration. Termination payout amounts, such as pro rata long service leave and pay in lieu of noticeĬALCULATING YOUR INDIRECT EMPLOYEE TURNOVER COSTSĭetermining your indirect costs can be difficult.Fees paid to consultants for conducting tests, checking references, pre-employment medicals, etc.Payroll taxCosts of advertising the vacancy.Other employer-supplied equipment such as mobile phones and laptops.Start with employee remuneration (base wage/salary).The first step is to calculate the employee’s total remuneration, the cost of benefits to the business and the value of associated on-costs. In this blog post, I will explain step-by-step how to calculate your direct, indirect and total employee turnover costs.ĬALCULATING YOUR DIRECT EMPLOYEE TURNOVER COSTS It’s incredibly important to understand your total employee turnover costs in order to effectively manage your HR expenses. This amount represents a substantial expense for any size business.Ĭalculating the direct costs of employee turnover is usually quite straightforward, but there are many indirect costs that need to be taken into consideration. Employee turnover costs can have a significant impact on your bottom line.ĭepending on the size of your business, the total costs of replacing an employee varies from 30-150% of their salary.
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