Turnover cost

Turnover cost
Primary topic
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Methods and techniques

Turnover costs – it is both material and non-material cost incurred by the enterprise at the time of replacement of employees. The cost of turnover includes the cost of employment at a given position, all severance pay and bonus packages, baskets related to employment and training of a new employee and the cost of employing a deputy for the time when the position is not filled. When a company is characterized by high employee turnover, it is exposed to a decrease in productivity or company profitability (Jones C., Finkler S. A., Kovner C. T. (2012) p. 181-182).

Three main elements related to the cost of turnover[edit]

There are three main elements related to the cost of turnover. It stands out for example:

  1. Manning positions - when the position is empty, the enterprise bears the cost of employing a deputy and then costs related to recruitment and the initial stage of employment of the person.
  2. Vacancy - time when the position remains empty. It directly affects the reduction of productivity.
  3. Implementation - new employees are not 100% productive. The enterprise must invest resources and time in integration, training and development.

Every organization should realize how much the cost of marketing the unit is. To reduce costs, the company should reduce staff turnover. Reducing turnover also affects the improvement of profitability and the increase of profits through more efficient operations (Mitchell B., Gamlem C. (2012) p. 104).

Indirect Costs of Turnover[edit]

The estimated turnover costs do not reflect in 100% the impact of the turnover on the company. They do not include, among others:

  • Reducing morale
  • Possibility of making mistakes by overloaded employees who work in a part-time team
  • Decrease in efficiency due to staff shortages
  • Effectiveness of the substitute person

All these factors are very difficult to estimate but should be included in the calculation of the actual turnover costs. High rotation in the company may also affect other areas. Lower experience of employees, especially in the training of new generators may have an impact on the safety or quality of work performed. After adding all the elements, the real turnover cost turns out to be much higher.

The Saratoga Institute estimates that taking into account all indirect and direct costs, the average cost of turnover equals the annual salary in a given position (Mitchell B., Gamlem C. (2012), p.58-61) .

Reducing Turnover through Better Selection[edit]

Complete elimination of trading is not possible. This is because trading is not an event that results from the presence of individual factors, such as workload, the possibility of promotion or ambiguity of roles. Rotation is a process. However, there are tools that can reduce overall turnover and increase retention. These tools are used in the recruitment process (Watlington E., Shockley R., Guglielmino P., Felsher R. (2010) , p. 22-27).

Approaches that bring the most benefits[edit]

Evaluating Risk Factors Some of the candidates are characterized by a greater propensity to trade. This can be identified before employment based on the traits that candidates have. Recruiters check, for example, the time of employment in a previous company or the candidate's attitude to making friends in the workplace. Motivational Fit Targeting motivations is another approach that reduces turnover. Just employing a suitably qualified employee will not guarantee more stable and productive work. The motivation of the employee is very important here. To properly motivate staff, a company should have an individual approach to the employee (Pinder C. C. (2012), p. 44-48).

References[edit]

  • Beveridge W. H. (2014), Full Employment in a Free Society , Sixpense
  • Jones C., Finkler S. A., Kovner C. T. (2012), Financial Management for Nurse Managers and Executives,Saunders, 4th Edition
  • Mitchell B., Gamlem C. (2012), The Big Book of HR , Career Press, Revised and Updated Edition
  • Pinder C. C. (2012), Work Motivation in Organizational Behavior,2nd Edition, Psychology Press, New York
  • Teichler, U., & Cummings, W. K. (eds.) (2015), Forming, recruiting and managing the academic profession
  • Tesar G., Kuada J. (2013), Marketing Management and Strategy, Routledge, New York
  • Watlington E., Shockley R., Guglielmino P., Felsher R. (2010), The High Cost of Leaving: An Analysis of the Cost of Teacher Turnover, "Journal of Education Finance", Vol. 36, No. 1

Author: Aleksandra Szczęch