How to Calculate Turnover

The Cost of Employee Turnover Is Huge

If business owners knew how to calculate turnover, they’d have a better understanding of how much turnover can cost. Take a look at this calculation. For a small business with 100 employees, and a turnover rate of 10%, the turnover cost would run at least $750,000 right off the bottom line. How can it be so much?

The methods of how to calculate turnover costs all share a similar ratio of expenses. The ratio is derived from the person’s annual compensation measured against expenses such as:

  • recruitment
  • training
  • lost productivity
  • new hire expenses
  • cost of lost sales
  • expenses created as a result of a person leaving

How to Calculate Turnover for the Ones You Are Hiring and Training

After reviewing the list of expenses associated with training and hiring an employee, you can see all businesses must come to appreciate how to calculate turnover in order to maximize profits. Expect the total to run about 150% of the person’s annual total compensation. For example, if the average employee in a company earns an average of $60,000 a year:

  • The cost of the turnover is going to be $90,000 per person.
  • For managerial and demanding sales positions, the cost will be 200% ($120,000) to 250% ($150,000).

How to Calculate Turnover on the One Who Just Left

In addition, the one who left is going to run you about:

  • 50% of that person’s compensation and benefits for each week you don’t have a replacement; those costs are due to lost productivity having others split their duties to fill in.
  • If the vacancy is extended, it’s going to cost about 100% a week – no reduction in expenses whatsoever.
  • Plus, expenses such as COBRA or unemployment will be on top of that.

Do you still think reducing headcount is a cost-effective alternative?

How to Slow the Turnover Hemorrhage

The relatively small expense for gadgets, time off, work flexibility and social perks will pay off in huge dividends by decreasing the annual turnover rate. CBR is staffed with highly-experienced HR professionals who can advise you. They can also carry the burden of HR functions such as recruiting, hiring, training, and firing as well as helping you find affordable employee healthcare benefits. Give us a call at our toll-free number, (888) 700-8512 and let us show you the many ways the future of your company can be more profitable.