New Tool for Employers Calculates the Full Cost of Employee Turnover

WASHINGTON, D.C.—Employee turnover costs businesses millions of dollars each year.  However, many employers don’t accurately track this expense, which could be reduced by improving workplace conditions.  To help business owners understand the cost of turnover, the Center for Law and Social Policy (CLASP) and Center for Economic and Policy Research (CEPR) have released an updated turnover calculator.  This dynamic tool allows employers to calculate turnover costs by responding to 10 simple questions.

When employees leave or are laid off, companies incur numerous expenses searching for and on-boarding their replacements; these include advertising, recruiting, background checks, benefits administration, training, and lost productivity while new employees become proficient at their jobs.  Taken together, these costs can have serious implications for bottom lines.  The turnover calculator allows businesses to input wages; weekly hours; and recruiting, hiring, and training costs to determine the financial impact for different categories of workers.

In today’s competitive marketplace, employers are closely attuned to employee retention factors. That’s why many have begun to implement worker protections that reduce turnover, including earned sick days, paid family and medical leave, and fair scheduling practices. But while some employers are leading in these areas, too many businesses haven’t caught on. Thirty-nine percent of workers (more than 41 million) still lack paid sick days; just 13 percent of civilian workers have access to paid family leave, and only about 40 percent of workers have short-term disability leave through their employers.

“A startling number of workers lose their jobs because they need to recover from illness, care for sick family members, or are welcoming a new baby,” said Liz Ben-Ishai, senior policy analyst at CLASP. “Job loss is devastating to families’ economic security, and the cost of hiring new workers cuts into businesses’ bottom lines. That’s why a growing number of employers are not only offering paid leave to their own employees but supporting public policies that expand access to a majority of U.S. workers.”

Twenty-one jurisdictions have passed earned sick days laws, and three states have enacted paid family leave laws. Additionally, 10 states are considering legislation that would guarantee workers fair, predictable schedules. Employer support is one reason for recent momentum. More than 340 employers have signed on to earned sick days legislative campaigns across the country, and several dozen have signed on to the federal Family and Medical Insurance Leave (FAMILY) Act.

Speaking in support of the FAMILY Act, U.S. Women’s Chamber of Commerce CEO Margot Dorfman touted the benefits of paid leave for employers. “It will reduce costs over the long term and level the playing field between small and large firms. Workers who have access to paid family leave are productive, loyal employees who spare businesses the high cost of turnover.”

“One of the greatest investments companies make is in employees,” added Eileen Applebaum, senior economist at CEPR. “But when an employee leaves, that investment is diminished. There are very good workplace policies like paid sick leave and national policies like paid family and medical leave insurance that help prevent losing that investment. Once employers understand the cost of turnover, they can see for themselves how workplace practices and public policies that support their employees affect their costs.”

Click here to access the turnover calculator.