The monthly cost of a worker’s job, counting wage, payroll taxes and benefits, is a number you already have in your books. On the example dairy in Wisconsin, a milker’s job costs $4,200. When that milker leaves, replacing him costs a little over three months of that job, $13,720 in the example, and only $1,000 of it arrives on a bill or a form. Seven items make up the total, and the two largest are time that nobody bills as a replacement. Fill in a one-page record for the last person who left, from the payroll, the exit file and a calendar, and you will know what that exit cost.
What goes into the cost of replacing a milker?
Seven items. Three leave a paper: the exit paperwork, the job ad and the hiring paperwork. Four are time: the owner’s hours at the interviews, the head milker’s days teaching the new hand, the days the job sat empty, and the months the new hand milked below full speed. The figures in the example are invented, for a dairy in Wisconsin.
Nobody bills the 18 empty days or the slow months as a replacement. The overtime lands on the payroll as ordinary overtime, and the new hand draws a full wage. Those two lines come to $10,620, 77 percent of the total. The three papers come to $1,000, 7 percent.
Add the same seven lines for your last departure, with your own figures.
Why do the two biggest items never show up in my books?
Because no entry carries the word replacement when the money goes out. During the empty days the overtime goes on the payroll as overtime. When the new hand starts at a fraction of the old output, the payroll looks like the month before. No bill arrives, so it looks as though nothing was spent. Bahn and Sanchez Cumming reviewed 31 US case studies for the Washington Center for Equitable Growth, an economic research group. They found that many businesses do not know what high turnover costs them or underestimate it.
The most detailed measurement comes from a hospital, not a farm. Ruiz and two colleagues followed the replacement of nursing staff at a Brazilian teaching hospital for four months and priced every step. In that time 38 staff left, 76 were hired, and the total came to R$314,605.62 (Brazilian reais). Three items made up 96 percent of it: the new hires’ slow months, the empty jobs and the drop in output of people about to leave. The other four, selection and hiring, orientation and training, recruiting and the exit, made up 3.8 percent.
Of those three, your books already hold the empty jobs, under another name. The authors found that 85.1 percent of that line was overtime for the staff who stayed, and 14.9 percent temporary contracts. Both are on paper, and neither is filed as the cost of replacing someone. After an exit, set the overtime of the next month beside a month when nobody left, and write the difference down as part of that replacement.
The cost also starts before the notice. In the hospital, the drop in output of people about to leave was 3.1 percent of the total. Billikopf and González, studying California dairies, describe workers who have “quit and stayed”: present on the job, with the mind somewhere else.
A hospital is not a farm, and the exit is where they differ most. The authors did not measure the exit medical exam, the registration and documentation, or the steps in the labor courts, so their exit line, 0.1 percent, leaves those out. On a farm the paper side is larger, 7 percent in the example. The order stays: the new hand’s slow months and the empty job are still the two biggest items.
What do the empty days and the new hand’s slow start cost?
The job goes empty the day someone leaves, before any hiring begins. Duda and Žůrková, in a study from a Czech agricultural university, state the rule: the longer the job stays without a replacement, the higher the cost of the departure. On a dairy no month is quiet, because the cows are milked every day, and Billikopf and González write that someone must be found to do the work until the worker is replaced. On a crop farm the same days cost more inside a planting or harvest window.
The learning period is the stretch in which the new hand does less than the person who left. Duda and Žůrková count the lost output twice, once during the temporary cover and once when the new person arrives. The day the replacement starts divides the two, so no day is counted in both. Their table compares three ways of covering the job over the first three months.
Covered by overtime from people who already know the job, the loss is a quarter of a month of work. Covered by a temporary worker or by the new hand, it is a month and a half, six times as much. What separates the two is a choice made in the first week after the exit, when nobody is thinking about cost yet.
The second trap is the hours of whoever teaches. In the hospital, the new hires’ line had two parts, and the larger was the time of the people orienting them: 64.4 percent, against 35.6 percent for work the new hires did not deliver. In the example, the head milker’s eight days sit on their own training line, and the slow-months line holds only the new hand’s missing work. Count the teacher’s days once, in one line.
Is my total high or low next to published figures?
Published figures vary widely, and almost none come from farms. The Washington Center for Equitable Growth pooled 31 case studies, in industries from healthcare to manufacturing. Turnover cost 39.6 percent of a position’s annual wage on average and 23.5 percent at the median, in a range from 2 percent to almost 150 percent. Duda and Žůrková reach up to one and a half times the annual wage, and Billikopf and González report that labor experts speak of about 150 percent.
Check what each figure was divided by. The published ones are shares of the annual wage. The example’s 27.2 percent is a share of the job’s annual cost, $50,400 (12 months at $4,200), which is a bigger number, so the same money gives a smaller share. Then check what was added. Duda and Žůrková count only the costs of the departure and leave out recruiting the replacement, so their figure and the US review count different things.
Use the published figures as a range of what others found, never as a target. Your total is worth most beside the next one you record.
What do I write first, and what does the total change?
Write the record of the last person who left. It takes an hour with the payroll, the exit file and a calendar, and the six-step checklist says what goes in it. When the total is in, divide it by twelve.
That figure is for people you would hire again. Billikopf and González point out that a voluntary exit can be a chance to hire someone better qualified without firing anyone. So write beside the name whether you would hire the person again today. If the answer is no, the cost is still real, but the decision is another one: shorten the empty days and the learning period instead of paying to hold on.
The reasons for leaving are short and old. In 2009, 114 dairy workers in three California counties described 222 earlier departures. Pay and benefits was the main reason in 29 percent. Schedules and time off, housing and transportation, and relations with management came to 27 percent together.
The record is worth more than the total on it, because it shows where the money went. Two farms with the same cost can have it for opposite reasons: one for a job it never hurried to fill, the other for a learning period nobody shortened. What fixes one does nothing for the other. Writing a decision down and setting it beside what happened is a habit the rest of farm management runs on too.
To count how often you pay this cost in a year, see how much turnover costs your farm, where you multiply the departures in a year by the total on this record. Deciding before anyone quits how each job gets filled shortens the empty days, and the article on a written hiring process is about writing that plan down. A first day list, a signed page of what the new hand gets on day one, shortens the learning period. The hiring and turnover cost calculator adds the items for you, and the people section of the library has more on managing farm workers.