Costs of staff turnover

Updated 14 August 2006 - This year's annual survey of recruitment, retention and turnover conducted by the Chartered Institute of Personnel and Development (CIPD) finds that turnover increased from 16 to 18 per cent in 2005.

Paradoxically, organizations in this year's survey were better at employee retention but an increase in the level of redundancies more than compensated for this. Losing staff, whatever the cause, is expensive: overall, the average cost of turnover per employee (including any redundancy cost) is now £8,200. For managers and professionals this rises to £12000.

Costs can be attributed to:

• Redundancy and administrative costs associated with the leaver's separation from the company
• Administrative costs associated with creating a vacancy
• Costs of covering the vacancy until it is filled
• Advertising, agency or online costs for the vacancy
• Costs involved in the selection process
• Induction and training costs

Employee turnover can be split into two categories: voluntary and involuntary. Voluntary turnover arises from individuals leaving organizations for their own reasons; involuntary turnover involves redundancy or dismissal. Voluntary turnover ("quitting") is normally unplanned as far as the organization is concerned. Strategically important individuals can leave at awkward times, creating further expensive consequences for a business. There is also a tendency for high proportions of new recruits to leave during the first few months of employment - the so-called 'induction crisis'.

Normally, according to the CIPD report, voluntary turnover substantially exceeds involuntary turnover. However, in 2005 there were four areas of the economy where involuntary turnover was high:

• Manufacturing - accounting for about one half of turnover
• Private services, public sector and voluntary sector - around one third of turnover

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