To find your turnover and ramp up cost, 3 numbers matter: the average annual salary, the number of employees you replace, and the number of additional new hires.
We’ll also need to make two educated guesses: The replacement cost for each lost employees, and the ramp up cost for each new one.
Let’s look at an example: a 50-person organization with 16% annual turnover adding 10 people over the next year with a $70,000 average annual salary.
Let’s assume a replacement cost of 9 months’ salary, or 75% of base. At 16% annual turnover the organization can expect to lose about 9 employees over the next year. At a cost/hire of $52,500, turnover costs $472,500 annually.
Cutting turnover by 25% would save $118,125.
Let’s assume an average cost to productivity of 50% wasted time over 6 months. Adding in 9 replacement heads, a total of 19 new employees will join in the next year. With 4 weeks paid vacation, the average salary is $1,458/week. That’s a cost/hire of $17,500, or $332,500 annually for 19 new hires.
Cutting ramp up time by 25% would save $83,125.
That’s a 28.75% increase in the salary budget of $700,000, enough for 2 additional hires.
Society for Human Resource Management, Apr. 16, 2015
Center for American Progress, Nov. 16, 2012
Gallup, Feb. 22, 2017
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