Ups and Downs Inc., a 4,000-employee organization, has a serious turnover problem, and management has decided to estimate its annual cost to the company. Following the formulas presented in Figures 5.3, 5.4, and 5.5, an HR specialist collected the following information. Exit interviews take about 45 minutes (plus 15 minutes preparation); the interviewer, an HR specialist, is paid an average of $33 per hour in wages and benefits; and over the past year, Ups and Downs Inc. experienced a 27 percent turnover rate. Three groups of employees were primarily responsible for this: production employees (40 percent), who make an average of $34.80 per hour in wages and benefits; clerical employees (36 percent), who make an average of $24.50 per hour; and managers and professionals (24 percent), who make an average of $48.75 per hour. The HR department takes about 90 minutes per terminating employee to perform the administrative functions related to terminations, and on top of that, each terminating employee gets two weeks' severance pay. All of this turnover also contributes to increased unemployment tax (old rate = 5.0 percent; new rate = 5.4 percent); and because the average taxable wage per employee is $34.42, this is likely to be a considerable (avoidable) penalty for having a high turnover problem. It also costs money to replace those terminating. All pre-employment physicals are done by Biometrics Inc., an outside organization that charges $350 per physical. Advertising and employment agency fees run an additional $750, on average, per termination, and HR specialists spend an average of four more hours communicating job availability every time another employee quits. Pre-employment administrative functions take another two and a half hours per terminating employee, and this excludes pre-employment interview time (one hour, on average). Over the past year, Ups and Downs Inc.'s records also show that for every candidate hired, three others had to be interviewed. Testing costs per applicant are $18 for materials and another $18 for scoring. Travel expenses average $125 per applicant, and one in every ten new hires is reimbursed an average of $75,000 in moving expenses. For those management jobs being filled, a 90-minute staff meeting is also required, with a department representative (average pay and benefits of $47.75 per hour) present. In the past year, 17 meetings were held. Finally, post-employment acquisition and dissemination of information takes 75 minutes, on average, for each new employee. And of course, all these replacements have to be oriented and trained. Equipment furnished to each new employee costs an average of $1,700, and a formal orientation program run by an HR specialist takes 2.5 days (20 hours) spread over the first two months of employment. New employees made an average of $32.50 per hour in wages and benefits. After that, a formal training program (run 12 times last year) takes four 8-hour days, and trainers make an average of $49 per hour in wages and benefits. About 65 percent of all training costs can be attributed to replacements for those who left. Finally, on-the-job training lasted three 8-hour days per new employee, with two new employees assigned to each experienced employee (average pay and benefits = $41.25 per hour). During training, each experienced employee's productivity dropped by 50 percent. Net DP was +$510,000.

What did employee turnover cost Ups and Downs Inc. last year? How much per employee who left?

What is the breakdown for the below?

Separation Cost:

1. Exit Interview

Time required prior to interview (minutes):

Time required for interview (minutes):

Interviewer's pay rate (hourly):

Number of turnovers during period:

For Percent of total separations/Average hourly wage

Front-line:

Administrative/support:

Management and professional:

2. Separation pay

Number of hours worked per week:

Number of weeks of severance pay:

3. Administrative Functions

Time required by HR department for administrative functions related to termination (minutes):

Average HR department employee pay rate (hourly):

4. Unemployment Tax

My organization is subject to unemployment tax:

Number of employees in organization:

Unemployment tax rate (percentage):

Base rate (percentage):

Number of employees earning more than $7,000 USD annually:

Weighted average earnings if less than $7,000 USD annually:

Estimated Cost of Employee Separations

1. Cost of exit interview $0.00

2. Cost of separation pay $0.00

3. Cost of administrative functions $0.00

4. Cost of unemployment tax$0.00

Total $0.00

Replacement Cost

1. Communicate Job Availability

Advertising and employment agency fees per termination:

Time to communicate job availability (hours):

2. Pre-Employment Admin Functions

Administrative time required per position to be filled (hours):

Number of positions to be filled:

3. Entrance Interview

Time required for interview (minutes):

Interviewer's pay rate (hourly):

Number of interviews during period:

4. Testing

Cost of materials per person:

Cost of scoring per person:

Number of candidates tested:

5. Staffing Meeting

Time required for meeting (minutes):

Department representative average pay rate (hourly):

Number of meetings during period:

6. Travel/Moving Expenses

Average travel costs per applicant:

Average moving cost per new hire:

Number of applicants during period:

Number of new hires during period:

7. Post-Employment

Time required for acquiring and disseminating information (minutes):

8. Medical Exams

Examination type:

In-house

Time required for in-house examination (minutes):

In-house examiner's payrate (hourly):

Cost of supplies used for in-house exam:

Estimated Cost of Employee Replacements

1. Cost of communicating job availability $0.00

2. Cost of pre-employment administrative functions$0.00

3. Cost of entrance interview$0.00

4. Cost of testing $0.00

5. Cost of staff meetings $0.00

6. Cost of travel and moving $0.00

7. Post-employment costs $0.00

8. Cost of medical exam $0.00

Total $0.00

Training Cost

1. Formal Training Program

Length of training program (hours):

Average hourly rate of trainer or trainers:

Number of programs conducted:

Percentage of training costs attributed to replacements:

Average hourly pay per trainee:

Total number of replacements trained during period:

2. On-the-Job Training (OJT)

Number of hours required for instruction:

Average hourly rate of experienced employee (mentor):

Proportional reduction in productivity due to training:

Number of new employees assigned to each experienced employee for OJT :

Average hourly rate per new employee:

Total number of instructions during period:

3. New Equipment

Cost of new equipment:

4. Orientation Costs

Length of orientation (hours):

Average hourly cost to deliver:

Estimated Cost of Employee Training

1. Cost of formal training -

2. Cost of on-the-job training-

3. Cost of training literature -

4. Cost of orientation -

Total -

Performance Cost:

1. Difference in Performance

Difference will be : Calculated or entered as a lump sum?

Compa-ratio of the leaving employee or group (between 0.8 and 1.2):

Compa-ratio of the replacement employee or group (between 0.8 and 1.2):

Annual rate of pay at the midpoint of the pay grade:

Estimated Performance Costs

1. Cost of difference in performance$0.00

Total Cost:

Total Estimated Costs of Employee Separations

1. Separation costs -

2. Replacement costs-

3. Training costs -

4. Performance costs -

Total -