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. An HR specialist collected the following information. Exit interviews take about 45 minutes (plus 15 minutes preparation0; the interviewer, and 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 response terminating. 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, ad 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 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, o 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 tow 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 expderienced employees 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?

Answer rating: 100% (QA)

SOLUTION To calculate the cost of employee turnover for Ups and Downs Inc we need to consider all of the costs associated with turnover Here is a brea... View the full answer