Organisations failing to calculate turnover costs

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The majority of organisations are not attempting to calculate staff turnover costs, according to new research.

Only 12% of the respondents to the CIPD Labour Turnover survey were able to provide approximation of the costs (9% in Ireland) and even these estimates are much lower that those calculated by expert consultants in the field.

The survey found that labour turnover for all employees stands at 16.1% in 2002, compared with 18.2% in 2001 and 26.6% in 2000. While the survey shows a lower labour turnover rate than the previous four years, it is still quite high historically, and employers continue to report that even these lower turnover levels have a negative effect on organisational performance and that it represents a significant cost.

CIPD Adviser on Reward and Employment Conditions, Charles Cotton, said: "There seems to be no systematic approach to stemming the losses - with most reporting the use of exit interviews as a tool to diagnose the reasons behind labour turnover. But the reality is that people do not always tell the truth for fear of burning bridges - and organisations need to be doing much more to find out why people leave them."

The CIPD is urging organisations to calculate the true costs associated with the departure of an employee including all direct and indirect costs incurred as a result of the resignation and the replacing the individual. This will mean recruitment costs, management time, the cost of induction and any training and taking into account that it will take the new incumbent some time to become fully effective in their job.

Key findings:

  • The average cost of labour turnover in 2002 for the UK is £4301 per leaver. The costs of turnover are highest for managers (£6807), followed by professionals (£5864). For Ireland, the average cost of staff turnover is £4927.

  • Perhaps unsurprisingly, the primary reasons for labour turnover relate to the lack of career and developmental opportunities and pay.

  • The most commonly reported initiative used by organisations to tackle turnover in the UK and Ireland is to increase learning and development opportunities.

  • The hotel, catering and leisure sector and call centres have the highest rates of staff turnover, at around 40% in 2002. Low rates of turnover (i.e. around 10%) are generally found in manufacturing, transport and storage, and paper and printing.

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