Calculating the high cost of employee turnover

You’ve probably heard people say organizations lose thousands of dollars each year due to employee turnover, but do you have any idea how to calculate what your case management program loses in dollars and cents each time one of your case managers walks out the door?

Here’s a formula suggested by Carl Keller, BA, PHR, president of two human resource and strategic business planning firms in Little Rock, AR, Employee Directions and Business Innovators:

1. Each time an employee leaves, the average turnover cost comes to 25% of the employee’s total annual wage. For example, for an employee earning $35,000, 25% would be $8,750.

2. Added to that cost is 25% of the total ben efits associated with the employee. Nationally, the average employee’s benefits equal 30% of the employee’s annual wage. For that same employ ee earning $35,000 annually, 30% equals $10,500 in benefits, of which 25% totals $2,625.

3. When you add $2,625 to the $8,750 calculated in the previous step, you have an average total cost for refilling that one $35,000 position of $11,375.

In addition, Keller notes, there are other hidden costs of high employee turnover. "You have lost productivity and poor morale among your remaining employees. You also lose customer satisfaction. Remember, your customers include patients and their families, but also providers and internal customers such as managers and top executives," he says. "Every time you lose an employee, you lose some continuity, which leads to customer dissatisfaction."