What you don’t know about employee turnover costs could be costing your company millions!

The actual dollar cost of employee turnover is often underestimated or unknown by many employers. Turnover costs continue to be an area where huge returns can be earned, but only by those companies willing to take active steps to reduce turnover and increase employee satisfaction, loyalty and productivity.

Studies have found that the cost of replacing lost talent is 70 to 200 percent of that employee's annual salary.

Sales force turnover costs have been reported in excess of $50,000 -$75,000 per salesperson leaving the organization.(1)

A significant portion, about 25%, of avoidable turnover is basically caused by the new hires feeling uncomfortable, unwanted, and unsure of their abilities in the first few weeks on the job.(2)

The turnover costs of a nurse who earns $47,000 a year totals $33,000.(3)

Research shows that 50 percent of work-life satisfaction is determined by the relationship a worker has with his or her boss. It stands to reason that a manager's style affects retention in a big way.(4)
           
The average cost to a supermarket of one turnover in a job paying just $5.50 an hour is $3,305 in a non-union operation and $3,653 for a union job, For those in higher paying jobs, the cost of turnover is also higher—almost $35,000 for a store manager in a non-union store.(5)

According to a 1998 National Restaurant Association study, turnover costs for restaurants average about $5,000 per employee. Cost estimates are similar for the lodging industry.(6)

Forty-five percent of 206 medium to large U.S. companies report that turnover costs them more than $10,000 per employee who must he replaced. One-fifth of the respondents peg such costs at more than $30,000.(7)

Turnover is costly!

The U.S. Department of Labor estimates that employee turnover costs a company at least one third of a new hire's annual salary.

Therefore, at minimum wage, the cost to replace an employee is estimated at $3,700.  At an annual wage rate of $30,000, turnover costs a company $10,000 for each departing employee.  For senior & middle managers and other highly paid employees, turnover costs are staggering, amounting to billions of dollars per year.

1Source: Journal of Managerial Psychology, Realistic Job Information and sales force turnover, Pitt & Ramaseshan, 02683946, 1995, Vol. 10, Issue 5
2Source: Chain Store Age, Nov 96, Vol. 72 Issue 11, p64, 3p
3 Source: Nursing Management, Apr 2002, Vol. 33 Issue 4, p18, 1p
4 Source: Training & Development, Apr 2000, Vol. 54 Issue 4, p29, 5p
5 Source: Coca-Cola Retailing Research Council
6Source: Hotel & Motel Management, 03/01/99, Vol. 214 Issue 4, p38, 2p
7Source: Workforce, Jul98, Vol. 77 Issue 7, p19, 1p

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