HRMorning.com » The real cost of replacement hiring

The real cost of replacement hiring

May 9, 2008 by Jim Giuliano
Posted in: Communication, Hiring, In this week's e-newsletter, Latest News & Views, Money, Retention and turnover

Figuring the cost of turnover is an inexact science at best. Inexact, but not impossible.

You’ve probably gone through enough replacement/hiring scenarios to know the drill pretty well. Still, it’s worthwhile to take a look at the typical process to see just what’s involved and whether you’re overlooking anything when you make your own list. Here’s a rundown from Penny Morey, an HR consultant who contributes to entrepreneur.com:

  • Separation processing:
    exit interviewer’s time
    departing employee’s time
    administrative functions relating to the departure
    separation pay associated with the departure
    unemployment tax related to the departure
  • Replacement hiring:
    attracting applicants
    pre-employment administrative expenses
    entrance interviews
    aptitude, skill, drug etc. testing
    hiring decisions meetings
    post employment physical exams
    post-employment information gathering (records, payroll, etc.)
    signing bonus
    employee finder’s fee
  • Training new hire:
    information literature (manuals, brochures, policies, etc.)
    general orientation
    job orientation
  • Lost productivity and lost business:
    additional overtime to cover the vacancy wages and benefits saved due to the vacancy
    performance differential while new employee gets up to speed
    low morale-related time wasted due to “water cooler grumbling”
    lost customers, sales, profits due to the departure

What’s all that cost? Estimates by Morey and the Society for Human Resource Management set the price at 38% of the departing employee’s salary.

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