Employee turnover significantly affects the financial performance of an organization. Good hiring practices can minimize the hard cost of employee turnover and increase employee satisfaction throughout an enterprise.

So how much does turnover affect your company's bottom line? Let's look at a comprehensive cost-of-turnover formula to answer this question.

This formula is intended to calculate the "hard" costs of turnover. This includes the time involved in recruitment, selection, and training of new personnel as well as the costs associated with advertising expenses and manpower. It does not take into account such indirect costs as employee morale, the time for new employees to equal their predecessor's level of competency, or the lost productivity associated with employees assisting in the transition period. While these are all valid issues when considering turnover, they are difficult to equate with a clear and uniform monetary value.

The financial and non-financial outcomes of reducing employee turnover are significant. By reviewing various aspects of your organization and taking appropriate action, including effective interviewing and hiring practices, orientation and training programs, you have the ability to reduce your organization's employee turnover. While this process requires dedication, it will save time, effort and money in the long run.

The following worksheet is designed to assist you in estimating the annual cost for the loss of one employee and to demonstrate the benefits of effective human resources and risk management programs.

Separation Processing
Exit Interview	Hours ___  x  Wage of Interviewer $ ___	= $ ____
	Hours ___  x  Wage of Exiting Employee $ ___	= $ ____
Severance Package (if the employee is terminated)	(varies by company)	= $ ____
Administrative functions related to the Exiting Employee	Hours ___  x  Wage of Administrative Support $ ___	= $ ____
Unemployment Compensation (if applicable)	Varies by State	= $ ____
	Total Cost of Separation Processing	= $ ____
Vacancy
Orientation of Temporary Help	Hours ___  x  Wage of Orienter $ ___	= $ ____
	Hours ___  x  Wage of Temp $ ___	= $ ____
Coworker burdens (overtime, added shifts, etc)	Hours ___  x  Wage of Coworker $ ___	= $ ____
	Total Cost of Vacancy	= $ ____
Replacement Hiring
Development of Advertisement	Hours ___  x  Wage of Developer $ ___	= $ ____
Cost of the Advertisement	# of Ads for this position ___  x  Cost of 1 Ad $ ___	= $ ____
Headhunter	15%1  x  New Hire's Annual Salary $ ___	= $ ____
Screening Applicants	Hours ___  x  Wage of Screener $ ___	= $ ____
Interviewing Applicants	Hours ___  x  Wage of Interviewer $ ___	= $ ____
Hiring Decision Meeting	Hours ___  x  Average Wage of Participants $ ___  x  # of Participants ___	= $ ____
Background Check	Hours ___  x  Wage of Reference Checker $ ___	= $ ____
	# of Applicants for the position ___  x  Cost of Background Check2 $ ___	= $ ____
Testing (Aptitude, Drug, Personality)	Hours ___  x  Wage of Tester $ ___	= $ ____
	# of Applicants for the position ___   x  Cost of a Test $ ___	= $ ____
	Total Cost of Replacement Hiring	= $ ____
Training New Hire
Administrative functions related to the New Employee	Hours ___  x  Wage of Administrative Support $ ___	= $ ____
Orientation	Hours ___  x  Wage of Orienter $ ___	= $ ____
	Hours ___  x  Wage of New Employee $ ___	= $ ____
On-the-Job Training	Hours ___  x  Wage of New Employee $ ___	= $ ____
	Hours ___  x  Wage of Trainer $ ___	= $ ____
	Hours ___  x  Wage of Employees covering for New Employee $ ___  x  # of Employees covering ___	= $ ____
Information Literature (manuals, brochures, policies, etc.)	# of Manuals ___  x  Cost of 1 Manual $ ___	= $ ____
	Total Cost of Training New Hire	= $ ____
Total Cost of Turning Over One Employee:
	Total Costs of Separation Processing + Vacancy + Replacement Hiring + Training New Hire	= $ ____
Total Cost of Turnover to Your Business:
	# of Exiting Employees per year  x  Total Cost of Turning Over One Employee	= $ ____

1 15% is an average percentage charged by headhunters 2 The average cost of a background check into an applicant's criminal, education, employment and driving history is $45.