Is This Cost Effective?

The great majority of the time it is not only very cost effective, but it also makes a difference in the work environment.

What is the cost of turnover or a poor employee???? A large number of companies – big and small – don’t have a dollar analysis on the cost of replacing an employee.

Here are some of the items needed to be considered in calculating the cost:

  • Advertising or recruiting costs
  • Time to review applications
  • Time interviewing applicants
  • Time and possible training costs
  • If the vacancy is because of firing someone, you might include the loss of productivity before you got them out the door. ie. 25% of their salary for 2 months (or would that be 6 months?)
  • Loss of productivity during hiring and training time
  • Toll and possible productivity cost of other employees taking up the slack
  • Any moving or bonus costs of hiring package

There is a huge range of estimated cost. For upper level management position it can range from ½ of the annual salary cost to 14 times the annual package. Whew!

It is rare to have it be less than 18% of the annual compensation when above considerations are included. Based on research from 2004, Employment Policy Foundation found it to be $13,355 per employee.

A decent rule of thumb could be (according to the research)

  • 35% of the annual salary for a non exempt employee
  • 75% of the annual salary for an exempt employee
  • 150% of annual salary for a top salesperson or upper level management

You can understand why lower turnover can make a real difference in the profits.

If The Job Could Talk Who Would The Job Hire? Call 512.278.1200 or 1-866-646-1200. No cost. No obligation.