Illustrating How to Measure Employee Retention Costs
To best illustrate how to calculate employee retention costs in a given period, a sample computation is presented below using the following givens:
Recruitment Costs to hire a new Customer Sales Representative (CSR) = $1,200
Training Costs to orient and coach a new CSR = $2,500
Employer’s Monthly FUTA Contributions (EC) = Ave. Salary/mo. $1,500 x 7.65% = $114.75 per CSR
Number of new CSRs recruited for the year = 30
Number of new CSRs who separated during the year = 15
Assumptions: Four new CSRs resigned after two months; four more resigned after 4 months and seven others resigned after 6 months.
Objective: To determine the Retention Costs and Turnover Costs of New Customer Sales Representatives hired during the year:
Step 1: Calculate the total training costs and employer’s expenses for new CSRs incurred during the year.
Recruitment costs of CSRs = 30 x $1,200 = $36,000
Training costs of CSRs = 30 x $2,500 = $75,000
Total Recruitment and Training Costs = $111,000
Step 2: Calculate Employer’s Contributions (EC) to FUTA for the 30 new CSRs during the year.
4 resigned CSRs= 4 x (2 x $ 114.75) = 4 x $229.50 = $918
4 resigned CSRs = 4 x (4 x $ 114.75) = 4 x $459 = $1,836
7 resigned CSRs = 7 x (6 x $ 114.75) = 7 x $688.50 = $4, 819.50
15 Active New CSRs = 15 x (9 x $ 114.75) = 15 x $1,032.75 = $15,491.25
Step 3: Calculate percentage of CSR turnover during the year of recruitment:
No. of resigned CSRs hired during the year of recruitment = 15
No. of new CSRs hired during the year of recruitment = 30
= 15/30 x 100%
Turnover rate of new CSR hires = 50%
Please proceed to the next page for the continuation of this section on how to measure employee retention costs.