Employee Turnover Costs

Employee turnover is something related to the going out and coming in of employees in an organization. Almost all organizations have to deal with the problem of employee turnover. The lesser the employees leaving an organization, the more would be the total productivity. Calculating employee turnover with the help of standard formulas is easily possible for corporate managers. Before we understand how to calculate employee turnover, let us first try to see the reasons or causes of employee turnover.

Main Reasons for Employee Turnover

Unsatisfactory Salary
Unsatisfactory salary can be one of the major reasons for employee turnover. When people enter the corporate world after studying very hard, they want a good starting salary. When the salary requirements are not met, employee turnover will naturally increase, So, giving competitive salaries at par with industry standards is very essential for companies.

Advancement Opportunities
Lack of advancement opportunities can also be one of the reasons for employee turnover. Apart from the salary, advancement opportunities are something a person looks for and when they are denied due to office politics or other reasons, people tend to get quite disheartened. Lack of advancement opportunities is one of the major reasons for employee turnover.

Lack of Good Work Environment
Lack of good work environment is also a major reason for employees leaving an organization. A well qualified professional requires a good work environment and good atmosphere at the workplace. Absence of these things and basic facilities can be a cause of employee turnover on a large-scale.

Discrimination
Discrimination on the basis of race, caste and gender is one of the biggest reasons for employee turnover. Though companies claim that they have strict laws in their firms, many cases of employees leaving organizations arise every year due to discrimination.

Calculating Employee Turnover

Cost of employee turnover can be calculated by using a simple formula. However, before you put all the values in the formula, you first need to find out the voluntary employee turnover, average several employees and involuntary employee turnover. The average number of employees are calculated with the formula given below.

Average number of employees = Employee number at the beginning of the period + employee number at the end of the period ÷ 2.

Voluntary employee turnover = Voluntary separations ÷ Average number of employees × 100.

Involuntary employee turnover = Involuntary separations ÷ Average number of employees × 100.

Total employee turnover = Total separations ÷ Average number of employees × 100.

These formulas will help you to calculate the employee turnover. You should also be able to find the employee turnover ratio and the formula for the same is given below.

Employee Turnover Ratio = Separations in the month ÷ Average number of employees in that month.

Turnover rate calculation will never go wrong with these formulas. Employee turnover costs are calculated by adding all the expenses incurred by the firm on hiring fresh employees and the procedure of ending the employment of employees who wish to leave the company. So, the each cost of replacements and separations should be added together to give you the total costs incurred on employee turnover. There are several factors on which the employee turnover costs depend. The number of times recruitment drives are held by the company will directly affect the total costs of turnover. So, the companies need to be quite selective and perfect when it comes to recruiting employees and choose only the quality ones who can stay committed to the organization for a long time.

The turnover costs have seen an upward trend post economic recession as people are leaving jobs to find better paying ones. The cost of employee turnover can be controlled by effective human resource policies targeted at retaining quality staff. So, think over it and taker decisions accordingly. All the best!