{"id":86,"date":"2017-04-13T17:47:49","date_gmt":"2017-04-13T21:47:49","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/hrm1stcanadianedition\/?post_type=chapter&p=86"},"modified":"2017-05-05T17:30:13","modified_gmt":"2017-05-05T21:30:13","slug":"8-1-the-costs-of-turnover","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/hrm1stcanadianedition\/chapter\/8-1-the-costs-of-turnover\/","title":{"raw":"8.1\u00a0The Costs of Turnover","rendered":"8.1\u00a0The Costs of Turnover"},"content":{"raw":"
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Learning Objectives<\/h3>\r\n
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  1. Be able identify the difference between direct and indirect turnover costs.<\/li>\r\n \t
  2. Describe some of the reasons why employees leave.<\/li>\r\n \t
  3. Explain the components of a retention plan.<\/li>\r\n<\/ol>\r\n<\/div>\r\nAccording to the book KEEPING THE PEOPLE WHO KEEP YOU IN BUSINESS by Leigh Branham, [1] the cost of losing an employee can range from 25 percent to 200 percent of that employee\u2019s salary. Some of the costs cited revolve around customer service disruption and loss of morale among other employees, burnout of other employees, and the costs of hiring someone new. Losing an employee is called turnover.\r\n
    Losing an employee is called turnover<\/strong>. Turnover can be either voluntary or involuntary.<\/div>\r\nThere are two types of turnover, voluntary turnover and involuntary turnover.\u00a0Voluntary\u00a0turnover\u00a0<\/strong>is the type of turnover that is initiated by the employee for many different reasons. Voluntary turnover can be somewhat predicted and addressed in HR, the focus of this chapter.\u00a0Involuntary\u00a0turnover\u00a0<\/strong>is where the employee has no choice in their termination\u2014for example, employer-initiated due to nonperformance. It has been suggested that replacement of an employee who is paid $8 per hour can range upwards of $4,000. [2] Turnover can be calculated by separations during the time period (month)\/total number of employees midmonth \u00d7 100 = the percentage of turnover. For example, let\u2019s assume there were three separations during the month of August and 115 employees midmonth. We can calculate turnover in this scenario by 3\/115 \u00d7 100 = 2.6% turnover rate.\r\n
    Percentage of Turnover<\/strong> can be calculated by separations during the time period (month)\/total number of employees midmonth \u00d7 100<\/div>\r\nThis gives us the overall turnover rate for our organization. We may want to calculate turnover rates based on region or department to gather more specific data. For example, let\u2019s say of the three separations, two were in the accounting department. We have ten people in the accounting department. We can calculate that by accounting: 2\/10 \u00d7 100 = 20% turnover rate.\r\n\r\nThe turnover rate in accounting is alarmingly high compared to our company turnover rate. There may be something happening in this department to cause unusual turnover. Some of the possible reasons are discussed in Section 8.1.1 \"Reasons for Voluntary Turnover\".\r\n\r\nIn HR, we can separate the costs associated with turnover into\u00a0indirect costs\u00a0<\/strong>and\u00a0direct costs.\u00a0<\/strong>Direct\u00a0turnover\u00a0costs include the cost of leaving, replacement costs, and transition costs, while indirect\u00a0turnover\u00a0costs include the loss of production and reduced performance. The following are some examples of turnover costs: [3]\r\n