Calculating the Cost of Employee Turnover

Feeding into the overall cost of employee turnover are quantifiable soft, hard and opportunity costs, including hidden factors such as the:

  • time and cost invested in onboarding new employees
  • manager and employee focus diverted to cover vacant employee slots
  • lost productivity as new hires learn the role, become qualified in key processes or are certified to represent products and services to customers
  • real revenue and customer loss when poor hires negatively impact customer experience
For an effective and highly remunerated manager, the cost can run as high as 5x total compensation according to research from the Society for Human Resource Management. In the emerging era of people analytics, senior executives and HR teams have a window of opportunity to competitively scrutinize and proactively manage employee turnover costs.

Without the support of a data-driven people analytics platform, assessing and monitoring the cost of turnover is a time consuming and mostly manual process that wastes significant resources. To optimize its contribution, organizations running a people analytics platform must link it with their performance management processes, regardless of how crude current measures of performance may be.

Linking people analytics with performance enables us to access the data required to calculate the cost of employee turnover; and understand the granular attributes driving superior performance. Integrating performance management and people analytics data means employee turnover costs can be rigorously assessed and constantly evaluated because ‘what gets measured, gets managed’.

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