cost fluctuatie

Cost of employee turnover

Let’s imagine what are the costs of employee turnover:

  • Employee performance drop after taking the decision to change their current job
  • Employee performance and engagement drop after their resignation
  • Engagement and motivation drop of colleagues when learning the resignation decision
  • Overtime of employees to substitute the activity of the resigned employee
  • Allowance paid to an employee who coordinates the activity for a period of time
  • Recruitment costs: recruitment team, job ad, testing/assessment center, manager time, etc.
  • The time in which the position is not filled
  • The investment made to develop the new employee
  • Onboarding costs (training, buddy, etc. )
  • Know-how which can disappear from the company
  • The time necessary for the employee to gain authority
  • The more expensive salary for the new employee

I am sure that you can add more elements to the list. These costs are easy or not so easy to quantify

The most trustworthy theories regarding the costs of employee turnover are:

  1. Bersin: 1.5-2 x annual salary
  2. Forbes:
    1. Entry level employees: 30-50% from annual salary
    2. Mid level employees: 150% from annual salary
    3. Highly skilled employees: 400% form annual salary
  3. Center of American Progress: 213% of the annual salary
  4. Accepted at common level is the formula: Cost of employee turnover = (Cost of hire + onboarding cost + development cost + unfilled position cost ) x (number of employees x procent annual turnover rate)

Razvan Radu

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