Life can be seen in two views, first is the good side of life and the second is the bad part. So concerning a company environment, the good is the side of the company is when the company is hiring a promising employee while the bad side of that is when the company loses a valuable or productive employee.

This could be summed done to what is knows as an employee or a company turnover rate. As discussed in the previous post, most times an employee or a company turnover rate have a negative implication or the other way round. For instance, when an employee is performing poorly onto heor she was later laid off in that process and replaced with someone who is motivated and excels at their job to which the company productivity can soar.

Globally, companies invest a lot of funds just to keep the activities going most importantly in a productive way. But when an employee hits the exit door a lot of costs come to play in which will definitely affect the companies productive. Also the same goes for when the companies hire a new employee, a lot of costs has been made just to bring that employee board.

So this articles aims at discussing what it actually cost a company when it loses an employee and when a company hires an employee. But wait, get yourself prepared for you are about to know because it might seem off but this is what top companies face, Let’s go

Cost of Losing an Employee

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For a company to succeed in today’s economy, it is important for them in finding and employing the best employee. This major happens to small companies who tend to compete with the big companies.

Research shows that the average cost to employ a new employee (i.e. employee or company turnover) is approximately 50 per cent of that employee’s annual salary. The society for human resources management(SHRM) detailed the breakdown of how losing an employee will affect the companies productivity. SHRM classified different levels(position) within a company that could be an effect, in which they are:

  • Entry Level/non-skilled Position
    • 30%-50% of an employees annual salary will be affected.
  • Service/ production Position
    • 40–70% of the employee’s annual salary will be affected.
  • Clerical/Administrative Position
    • 50–80% of the employee’s annual salary will be affected.
  • Skilled hourly Position
    • 75–100% of the employee’s annual salary will be affected.
  • Professional Position
    • 75–125% of the employee’s annual salary will be affected
  • Technical Position
    • 100–150% of the employee’s annual salary will be affected.
  • Supervisor Position
    • 100–150% of the employee’s annual salary will be affected.
  • Executive Positon
    • 200%+ of the employee’s annual salary will be affected.

The employee retention of a company is all it takes to keep an employee, but when the employee retention of a company is low, the company is at the verge of losing that employee. The factors considered for a manager in calculating the cost of losing employees are:

  • The expenses it takes to employ or hire a new employee including the advertisement, examining, screening, and hiring.
  • The costs it takes to onboard a new person with the training and time management because a lot could be at stake at the time.
  • Loss of productivity: for new employees, it might take two to three years to reach the productivity of the current employees.
  • Training cost: for instance, it might take two to three years for a company that invested 10-20%(per cent) of the employee’s salary in training schemes.
  • Cultural essence: Whenever an employee leaves, it reduces the productivity of the company because current employees will begin to ask questions about what could have lead to the exit of the previous employee which might eventually lead to a high turnover rate.

For companies who still find it hard to reduce the cost of losing employees is simply because they tend to have a system that keeps track of the exits costs, recruiting, interviewing, hiring, lost productivity, potential customer dissatisfaction, reduced or lost business, organisational costs, lost expertise, etc.

Cost of hiring an Employee

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Whenever you embark on the process of hiring a new employee, difficulties lie ahead for whosoever is in charge of hiring the new employee because he or she is uncertain the qualities the new employee has. This process is notably difficult and it takes a lot of skills, time and money to hire the right employee for that position.

A lot of factors are been considered and calculated so as to figure out what it cost to hire an employee in which most companies have to go through a similar process to hire the employee.

There are factors companies globally tend to consider when hiring a new employee in which theses factors are been explained below:

1. Cost of Recruiting

The job description of the position to be filled must be well-detailed whenever you are recruiting an employee on to which in most cases is actually complicated. Identifying the core functions in performing the job also with the skill set required and don’t forget to arrange a market-based salary range for the job. This particular stage is critical because they play a potential role in determining a reasonable accommodation for the new employee.

2. Costs of Training

For every new employee hired, they need to learn how the company operates and what is expected of them to do. The higher the responsible and pay for the job, the higher the cost spent on training. When a new employee is hired, the employee needs to go through the training process in which would help in knowing the company better and helps the company productivity rate.

These above factors should channel a company human resource personnel in knowing the cost it takes in hiring a new employee and how ti could be accomplished successfully.


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Nevertheless, losing and hiring employees as a lot of costs in similar but works in a diverse direction.  Prepare carefully so that you truly employ for the skills you’ll need today, tomorrow and in the future to come and please and don’t wait until you’re desperate to start the recruiting process.

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Thank You!!!