Compdata Surveys & Consulting Blog

Identifying the Cost of Turnover

Posted by Ashley Ulsh on Mar 29, 2018 10:15:00 AM

Blog guest written by Theresa M. Worman.

Voluntary turnover has grown from 9.1 to 13.5 percent over the past five years, according to the latest data from Compdata Surveys & Consulting.

With unemployment hitting record lows and employers increasingly focused on retention, it can be valuable to identify and track the cost of turnover to your organization. Tracking provides a metric to the challenge, helps identify which departments need to be addressed first, and helps validate your proposed solution to leadership.  But how do you go about identifying the cost of turnover?

Businessman hand drawing increasing graph on media screen

Gathering Data

Turnover has soft costs such as a negative impact on organization culture, as well as hard costs such as recruiting, acquisition and placement costs. For a turnover costing model, it’s important to gather data that is measurable, relevant and indisputable.

First, you’ll want to assemble a cross-functional project team. In addition to human resources and finance, also consider including affected department heads, executives and operations employees. Together, you’ll evaluate data for inclusion. Remember that it’s more important to have leadership agreement on the data points than to be all encompassing. Possible data points might include:

  • Separation costs such as exit interviews, administrative costs and more
  • Acquisition costs such as recruiting expense, relocation fees and sign-on bonuses
  • Placement costs such as agency fees, on-boarding and training

You’ll want to gather data on the total cash compensation and benefits of select positions and the projected number of exits, as well as the expected amount of time a position will be vacant and how long it will take a new hire to become productive.

Calculating Costs

Once your data is gathered, select a benchmark position to use for validating the results. Be sure the position is visible across the organization, and would be a hindrance to organization success in the event of significant turnover.

With your cost factors available, calculate:

  • Gross lost productivity
  • Net lost productivity
  • Cost of losing one employee including separation, acquisition, placement and net lost productivity
  • Total position turnover cost based on the projected number of exits

Utilization of Data

It’s important to communicate the cost of turnover to leadership in a clear manner that will be easily understood. Use graphs, charts and financial calculations to help convey the information.

This data can be used to help justify programs that reduce turnover such as more competitive compensation, career advancement opportunities, flexible scheduling and educational programs.

Ultimately, identifying and clearly communicating the cost of turnover helps make HR a strategic partner in your organization’s success.

If you have additional questions about identifying the cost of turnover or other HR challenges, please contact Compdata Survey & Consulting at (800) 300-9570 to request a discussion with one of our consultants. We are happy to help.

Download the Cost of Turnover infographic below:

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Theresa M. Worman is a recognized compensation expert with over 20 years of experience in the industry. She is the Executive Vice President for Strategy & Development at Compdata Surveys & Consulting.

Topics: employee turnover, Turnover, Turnover Rates, cost of turnover, Retention

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