The Cost of Employee Turnover

While you cannot find a budget line item for the cost of employee turnover – the costs are most certainly there.  Some are obvious direct costs, while many are indirect and hidden expenses (such as the impact on productivity).  The bottom line is that disengaged employees are less productive and they impact both growth and profitability due to not being committed to the company and its performance.  The impact of engagement is called the Employee Profit Chain.

How much does employee turnover cost?  The Society for Human Resource Development (SHRM) estimates the cost can range from 50% to 200% of their annual salary depending on their level¹. 

• Entry-Level/Clerical: 30% to 80% of their annual salary.

• Mid-Level/Professional: 100% to 150% of their annual salary.

• Technical, Executive, or Highly Specialized: Up to 200% to 400% of their annual salary.

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SHRM also reports that experts emphasize that 60-70% of turnover costs are hidden (lost productivity, team disruption, loss of knowledge).  Additionally, the cost does not include reputation’s impact on recruiting employees and customers. 

The costs associated with employee turnover include items such as the following:

Separation

·        Severance pay, accrued PTO, exit interview, temporary or permanent loss of production, HR administrative time.

Recruitment

·        Recruiter fees, new hires demanding higher compensation, advertising, HR staff time (administrative tasks, screening, assessments, interviews, communication, paperwork, etc.), manager time (interviews, meetings), and ancillary costs (background checks, uniform, business cards, etc.).

Productivity

·        Lost productivity (time for new hires to ramp up to full capacity, plus lost output while the position is vacant), team disruption (remaining employees must take on workload, leading to fatigue, burnout, and a drop in overall engagement), loss of knowledge (company operational knowledge, resident relationships, and specialized skills), temporary employee pay or overtime for other employees; onboarding, orientation, formal training, staff time.

Service Delivery - Resident Turnover

·        The hard costs associated are significantly lower than how employee turnover harms service delivery and resident turnover; the impact is clear when a property has vacant leasing consultant or maintenance technician positions.  Research by ManagInc found that resident turnover decreases by nearly one point for every one point decrease in employee turnover.

About the Author:

Doug Miller is Founder and CEO of RE/SRCH, a research and consulting services provider, as well as Partner and Chief Research Officer with Swift Bunny, where he oversees research programs.  Prior to this, Doug was Founder and CEO of ManagInc; its employee, resident, and service provider feedback system helped clients enhance their focus on stakeholders to improve employee retention, resident retention, and reputation. Before ManagInc, Doug was Founder and President of SatisFacts Research, the multifamily industry’s leading resident feedback program provider. Doug started his career in property management in the 1990’s, including as Director of Marketing for two NMHC Top 50 firms. Doug earned his BSBA from Washington University/St. Louis and MBA/Marketing from The American University.

1: Source: https://www.shrm.org/executive-network/insights/myth-replaceability-preparing-loss-key-employees