Best Metrics: Cost of Employee Turnover

KPI: Cost of Employee Turnover 
DEFINITION: The expenses incurred by a company in replacing an employee, encompassing recruitment, training, and productivity loss during the transition period.

SIGNIFICANCE OF THIS METRIC

There are direct and indirect costs involved with cost of turnover that client's should be aware of, including recruitment expenses, training costs, and potential productivity losses. Understanding this metric allows businesses to allocate resources effectively, plan budgets more accurately, implement targeted retention strategies, and ultimately contribute to long-term financial stability and organizational success by fostering a stable workforce.

RECOMMENDATION

If the cost of turnover is found to be excessively high compared to the client's peers, recommend implementing measures to address the root causes. Possible measures include:

• Conducting exit interviews
• Develop competitive compensation packages
• Investing in professional development programs
• Fostering a positive workplace culture, that recognizes employee contributions, implementing flexible work arrangements or other benefits that align with employee needs.

By addressing these factors, you can reduce turnover, control associated costs, and promote a stable and content workforce.

SPECIFIC INDUSTRIES

The importance of tracking the Cost of Turnover can vary across industries, but generally, industries with high turnover rates or those heavily reliant on skilled labor tend to prioritize this financial metric. Here are three industries where it's typically crucial to monitor the Cost of Turnover:

1. Hospitality and Food Service Industry: This industry often faces high turnover rates due to factors such as seasonal employment, entry-level positions, and demanding work environments. (NAICS Code: 722 - Food Services and Drinking Places)

2. Retail Industry: Retail businesses, especially those with a large number of front-line staff, frequently experience turnover due to factors like flexible scheduling, part-time employment, and competition for skilled workers. (NAICS Code: 44-45 - Retail Trade)

3. Healthcare Industry: Healthcare organizations, including hospitals and nursing homes, often deal with high turnover rates among nurses, technicians, and support staff, which can significantly impact operations and patient care. (NAICS Code: 62 - Health Care and Social Assistance)

These industries often have specific challenges related to turnover costs, including recruitment expenses, training costs, and productivity losses, making it essential for companies within these sectors to closely monitor and manage their turnover-related expenditures.

If you want to share cost of employee turnover metrics with your clients, click the link below to start using Peerview Data today!

Peerview Data provides comparative analytics and benchmarking solutions to accounting firms, enabling them to turn client data into actionable insights like the ones in this blog post. 

For more information on the value of measuring financial ratios, read here.