Employee turnover may occur for a variety of reasons, including:

• Injury or illness that leads to a permanent incompatibility between a worker’s functional ability and the requirements of the role;
• Dissatisfaction with the working environment;
• The perception that there are better opportunities available elsewhere;
• A lack of accommodation of temporary or permanent limitation in the workplace;
• Low morale; and
• Strained supervisor / employee relationships.

Poorly designed and implemented injury management systems may contribute to staff turnover, and may impact poorly on health and wellbeing. Therefore, understanding the costs associated with staff turnover may assist return to work professionals make the case for improvements to injury management in a particular organisation, workplace or team.

There are two factors to consider when calculating the cost of staff turnover:

• The rate of staff turnover—i.e. what percentage of staff within a particular team, workplace or company has moved on in the last 12 months; and
• The cost of each instance of turnover.

In short, you will be asking:

1. Do we have a problem with staff turnover?
2. How much does this problem cost?

Calculating the rate of turnover

You can calculate the percentage rate of staff turnover in a company, team, or section using two easy steps.

First, divide the number of employee departures the company, team or section has experienced in the last year by the number of staff members employed over the last year. Second, multiply that number by 100.

For example, four people have left the marketing and communications team over the last 12 months. There is a total of 11 people employed in this team.

4/11 x 100/1 = 36.36%.

The marketing and communications team has 36.36% staff turnover.

The next step is to compare this rate to the rate in other parts of the company. Is it higher or lower than in other teams? If it is higher, do you have any indication of why?

• Have there been any stress claims?
• Are there any long term open claims?
• Are the jobs in this team designed to support health and wellbeing?
• Is there respect for work life balance?
• Could an ineffective line manager be contributing to turnover?

When calculating the company-wide level of turnover, you may be able to compare the result with the turnover rate in other organisations working in a similar industry.  

Calculating the cost of employee turnover

The cost of staff turnover includes costs associated with:

• Paying out accrued hours and leave entitlements;
• Temporary replacements or overtime until the job is filled;
• Advertising, selection and recruitment;
• Induction, and on and off the job training time for the new employee; and
• Lost productivity.

Australia’s Equal Opportunity for Women in the Workplace Agency (EOWA) has produced a tool that allows organisations to estimate the costs of employee turnover. This tool is available online, here.