Costs of employee turnover

Abstract

DUDA JIŘÍ, ŽŮRKOVÁ LENKA: Costs of employee turnover. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2013, LXI, No. 7, pp. 2071-2075 The aim of this paper is to establish a general methodology for calculating the costs incurred by employee turnover. This paper deals with identifi cation of costs incurred by the departure of an employee, and does not deal with the cost of recruitment of a new employee. Economic calculations are adjusted to the tax policy in the Czech Republic. The costs of employee turnover (according to Bliss, 2012) include the costs of substitution of the unoccupied position, costs of conducting the exit interview and termination of the contract. The cost of an executive's time to understand the causes of leaving and costs of the leaving employee's training were also determined. Important factors in the costs of employee turnover also include the loss of knowledge and possibly also a loss of customers. Costs of lost employee and department productiveness represent an important part of the costs of employee turnover, as well. For all of these costs there have been proposed general calculations formulas. Bliss, costs, employee turnoverIn each company, the employee turnover is a part of the human resources management. Basically, this phenomenon is rather important because without it, the performance of people could stagnate and the competitiveness of the company could be gradually reduced or even lost. However, a high degree of staff fl uctuation is not desirable due to the fact that it is associated with relatively high costs. Many authors (e.g. Frech, 1986; Milkovich and Bourdeau, 1993;Dvořáková, 2004;Armstrong, 2007;d'Ambrosová, 2009) defi ne the employee turnover as a loss of people and/or the percentage of staff replacement within a given time interval. According to Reiß (2008), Ongori (2007), Shahnawaz (2009) and Koubek (2007), the employee turnover can be expressed as the ratio between the total movements of employees in and out of the organisation. The Saratoga Institute (Branham, 2009) estimates that average costs associated with the loss of one employee are equal to his/her annual salary. According to Bliss (2012), the average costs associated with the departure of an employee represent as much as 150 % of his/her annual income. MATERIALS AND METHODSThe aim of this study was to develop a general methodology how to calculate costs resulting from and associated with the employee turnover. The authors tried to develop mathematical formulas enabling to calculate these costs so that they could be used by employers and companies when defi ning total costs related to the staff fl uctuation. The general methodology was based on classifi cation of costs published by Bliss (2012).This paper deals only with the identifi cation of costs associated with the departure of employees; costs of recruitment and training of new employees are not discussed. Calculations are adapted to principles of taxation policy of the Czech Republic. The so-called super gross salary involv...

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