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Writer's pictureAndrée Laforge

How much does turnover cost?

As I've mentioned several times, employee turnover is costly for an organization. Very costly, in fact. To help you better understand the impact, here are some enlightening statistics I found.


A few years ago, the Coca-Cola Company estimated that it cost $3,637 to replace a minimum-wage employee (New Ideas for Retaining Store-Level Employees, Coca-Cola Retailing Research Council, 2000). In 2009, a University of Arizona study estimated the cost of replacing a general practitioner in a hospital at $115,554, a specialist at $286,503, and a super specialist surgeon at $587,125.


When you factor in all the costs, including the more hidden ones (lost productivity, missed business opportunities, integration efforts, impact on employee morale, etc.), you realize that turnover can lead to staggering expenses. Here's an interesting chart* to illustrate these costs.


Job group

Turnover cost (percentage of annual salary)

Entry level, unqualified

30 % to 50 %

Production employees

40 % to 70 %

Qualified employees (hourly rate)

75 % to 100 %

Office and administration

50 % to 80 %

Professionals

75 % to 125 %

Technicians

100 % to 150 %

Engineers and specialists

200 % to 300 %

Supervisors and team leaders

100 % to 150 %

Intermediate managers

125 % to 200 %

Upper management

200 % to 400 %


*Source: "Proving the value of HR: How and Why to Measure ROI" by Jack J. Phillips, Patricia Pulliam Phillips


But what is the cost for a company with a turnover rate of around 11%? Let's imagine a company with 1,000 employees and a turnover rate of 20%. The simplified breakdown of this organization into 4 job levels is as follows:


Job Group

Average Salary

Turnover cost (% of salary)

Turnover cost ($)

Number of departures

Total

Entry level, unqualified

$ 42 000

30 %

$ 12 600

148

$ 1 864 800

Qualified employees

$ 65 000

75 %

$ 48 750

35

$ 1 706 250

Intermediate managers

$ 92 000

125 %

$ 115 000

15

$ 1 725 000

Upper management

$ 190 000

200 %

$ 380 000

2

$ 760 000

Total




200

$ 6 056 050


A 20% turnover rate would cost this company $6,056,050 per year! I don't know about you, but these figures make me dizzy. So go ahead! Calculate your annual turnover rate and the associated cost. Do it before you go on vacation, so you have time to digest the information!

Remember, every 1% reduction in your turnover rate represents significant added value for your organization. Let's go back to the previous example, but lowering the turnover rate to 18%.

Job Group

Average Salary

Turnover cost (% of salary)

Turnover cost ($)

Number of departures

Total

Entry level, unqualified

$ 42 000

30 %

$ 12 600

137

$ 1 726 200

Qualified employees

$ 65 000

75 %

$ 48 750

30

$ 1 462 500

Intermediate managers

$ 92 000

125 %

$ 115 000

12

$ 1 380 000

Upper management

$ 190 000

200 %

$ 380 000

1

$ 380 000

Total




180

$ 4 948 700


That's still a difference of $1,107,350... That's where your added value lies: finding the program or implementing the initiative that will enable you to reduce turnover by 2% in your organization.

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