Estimate of Turnover Cost Discussion

University Estimate of Turnover Cost Discussion

Please answer the below question. This is a HR class. I have attached the Long Turnover Calculation Formula that is needed.

Question: Using the Long Turnover Calculation in the Course Content, create an estimate of turnover costs for your current position (or a previous position) and discuss why or why not the estimate seems accurate?

Note: The cost of turnover is difficult to determine because actual costs do not show up as a line item on a financial report. Some common turnover cost estimates are 50% of the annual salary and benefits for exempt employees and 35% for nonexempt employees. If the position is specialized, the cost can be as high as 150% of annual salary!

Another important consideration regarding turnover is the effect on productivity. When an employee is planning to leave, productivity often declines. When a new employee is hired, ramp-up time is required for optimum productivity. In addition, the productivity of other employees is affected because they are providing on-the-job-training and resources for the new team member. If the productivity change negatively affects quality, there can be severe ramifications for a company.

Other elements of cost from voluntary and involuntary turnover include transfers, absenteeism, and tardiness. Employees committed to the organization come to work on time. Those employees who are looking for another job predictably miss work leading up to their departure. Search firm fees, training, severance, and sign-on bonuses also enter into the formula, as does time required to recruit and interview a new employee. Unfortunately, legal costs must be considered in many instances of downsizing and termination.

 

Figuring Turnover Costs for (Position Title):                                                         

 

Figure for Each Position to Obtain Totals By Department, Location, or All Yearly Turnover

 

Separation Costs

1. Exit Interviews (salary & benefits of interviewer & employee)                              
2. Value of Separation Package, including Post-Employment Salary                          
3. Termination administrative & recordkeeping                                                      
4. Increase in Unemployment Tax (marginal rate increase + add tax)                               
5. Costs of Employee Gap (Lost productivity in other positions from having to “cover” the position, temporary replacement

or outsourcing, team gaps, information/knowledge loss)                                    

 

Total Separation Costs                                         

 

Recruiting & Selection

1. Advertising for position (Recruitment agency fees, ads)                                      
2. Pre-employment administrative functions and processing

(Clerical, supervisory, managerial time and overhead)                                         

1. Selection Interviews

(Time and overhead for multiple candidates)                                                     

1. Pre-employment testing and information-gathering (Style, competencies, job fit, integrity, drug testing,

background check, references, medical)                                                           

1. Meetings to discuss and evaluate candidates

(Time, travel, overhead)                                                                                  

1. Initial Benefits (Relocation, hiring bonus, incentives)                                           
2. Post-employment administrative functions and processing

(Benefits records, payroll setup, medical exam, etc)                                            

 

Total Cost Recruiting and Selection                                  

 

Orientation & Training

1. Salary & benefits while in classroom training                                                     
2. Salary & benefits while getting up to speed                                                       
3. Salary & benefits of classroom trainer                                                               
4. Salary & benefits of field trainer or manager                                                      
5. Equipment, manuals and materials                                                                  

 

Total Cost Orientation and Training                                  

 

 

Lost Productivity, Opportunity, Sales

What would you estimate above performance would produce?

(Value per unit of production, sales and profits, opportunities, initiative)                     What do you estimate this employee’s performance to have been?                                                              

 

 

Total + or – Productivity, Opportunity, Sales
Grand Total Per Employee