They also factor out temporary or contract employees in their turnover formulas. Furthermore, some also may omit unavoidable turnover due to death, illness or a spouse's relocation. Beyond that, the challenge for HR is to capture all the costs, so that strategies can be aligned with true expenses. Pre-turnover, for instance, may include costs that result from the employee's slower work pace and increased absenteeism. Mr. O'Malley also points out that involuntary turnovers often incur a grievance process, which can be time-consuming for everyone concerned.
Actual separation can incur severance pay, unemployment costs or litigation fees.
Vacancy costs will include lost opportunities in sales and service, as well as expenses such as overtime pay for employees who pick up the slack. Added to that are wages of employees who recruit, process paperwork, conduct interviews and tours, give tests, train and conduct orientation, along with the wages of support staff who hook up computers and phones, process identification badges and so on. Many HR staffs have already captured some of these figures in assessing their company's cost per hire, but that is only one component of turnover expense. Using Industry Estimates Industry associations and surveys may provide a benchmark to base individual turnover costs. Specific industry groups can usually calculate average costs or devise formulas with reasonable accuracy.