It’s typical that
organisations invest more than 40% of their revenue on salaries and wages of
their employees. The management and more particularly the loss management of
this resource is critical given it represents a substantial direct and indirect
cost.
Despite this impact on
profit, many organisations fail to accurately calculate employee turnover. At
best organisations focus on the direct costs of turnover accurately but fail to
calculate indirect costs which encompass turnover’s effect on employee productivity
and prove difficult to quantify, but account for at the majority of total
turnover costs.
Inaccurate diagnostics
tools and calculation methodology contribute to HR inability to get traction
around focusing on addressing costly employee turnover, with the outcome being
that organisations continue to suffer the loss of valuable human capital,
weakening their competitive position.
There are two types of
turnover costs, direct and indirect.
Direct costs include:
- Separation costs
- Vacancy costs
- Recruiting costs
- Hiring costs
- Training Costs
Indirect costs include:
- Pre departure lost productivity; employee, supervisor, co-workers, subordinates
- Vacancy period lost productivity; employee, supervisor, co-workers, subordinates
- New employee on boarding lost productivity until fully competent; employee, supervisor, co-workers, subordinates
Direct costs are those
that are easier to quantify as they’re tangible, whereas indirect costs that
focus on the effect on productivity are much harder to quantify.
Although difficult to
accomplish, the effective calculation of employee turnover results in the
ability to get traction on interventions to prevent it. If you find calculating your cost of
turnover accurately, too complicated we can help you assess over 30 variables
that give you a accurate and considered cost of turnover for a key position as
well as share the best practice model we use.
Contact us now to get
a free cost of turnover analysis worth $1,800 on any key position.
