Replacing the Workforce
A look at the costs to a company when replacing an employee.
This paper looks at how the volatile job market of the past decade has taken its toll on the finances on many companies. It analyzes the monetary costs as well as the effects on production, interpersonal dynamics and reputation of the company.
“One of the most difficult problems companies had to cope with in the increasingly volatile business climate of the 1990’s was the high rate of employee turnover. When employees, particularly long-term employees leave a company that has made a substantial investment in them, they take with them training, skills, experience, and productivity. Output is inevitably diminished during the training process of new employees, no matter how qualified. Furthermore, a high level of workplace turnover rends the types of social bonds that encourage other employees come to work and maintain their customary levels of productivity. (Bavendam Research Incorporated) The US Department of Labor estimates that it costs a company one-third of a new hire’s annual salary to replace an employee. Using a wage rate of only $6 an hour, it costs a company $3,600 for each departing employee. (Brannick) ”