3. Ups and Downs, Inc., a 4,000-employee organization, has a serious turnover problem, and management has decided to es
Posted: Tue Apr 26, 2022 12:57 pm
3. 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. Follow the formulas provided to you in class using the following information.
Exit interviews take about 45 minutes (plus 15 minutes preparation); the interviewer, a personnel specialist, is paid an average of $13.00 per hour; and over the last year Ups and Downs, Inc, experienced a 27 percent turnover rate. Three groups of employees were primarily responsible for this: blue collar workers (40 percent), who make an average of $14.60 per hour; clerical employees (36 percent), who make an average of $10.50 per hour; and managers and professionals (24 percent), who make an average of $23.30 per hour. The Human Resources department takes about 90 minutes per terminating employee to perform the administrative functions related to terminations, and 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 since the average taxable wage per employee is $14.90 this is likely to be considerable (avoidable) penalty for having a high turnover problem.
It also costs money to replace those terminating. All preemployment physicals are done by Boimetrics, Inc., an outside organization that charges $100.00 per physical. Advertising and employment agency fees run an additional $250.00, on the average, per termination, and personnel specialists spend an average of four more hours communicating job availability every time another employee quits. Preemployment administrative functions take another two and a half hours per terminating employee, and this excludes preemployment 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 $8.00 for materials and another $8.00 for scoring. Travel expenses average $50.00 per applicant, and one in every ten new hires is reimbursed an average of $36,000 in moving expenses. For those management jobs filled, a 90-minute staff meeting was also required, with a department representative (average pay of $22.75 per hour) present. In the last year seventeen meetings were held. Finally, post-employment acquisition and dissemination of information took 75 minutes, on the average, for each new employee. And of course all these replacements had to be trained. Informational literature alone cost $11.00 per package, the formal training program (run twelve times last year) takes four 8-hour days, and trainers make an average of $24.00 per hour. New employees made an average of $11.50 per hour, and 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 = $17.25 per hour). During training each experienced employee’s productivity dropped by 50 percent. Net DP (Difference in Performance) was +$100,000. What did employee turnover cost Ups and Downs, Inc., last year? How much per employee who left?
Exit interviews take about 45 minutes (plus 15 minutes preparation); the interviewer, a personnel specialist, is paid an average of $13.00 per hour; and over the last year Ups and Downs, Inc, experienced a 27 percent turnover rate. Three groups of employees were primarily responsible for this: blue collar workers (40 percent), who make an average of $14.60 per hour; clerical employees (36 percent), who make an average of $10.50 per hour; and managers and professionals (24 percent), who make an average of $23.30 per hour. The Human Resources department takes about 90 minutes per terminating employee to perform the administrative functions related to terminations, and 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 since the average taxable wage per employee is $14.90 this is likely to be considerable (avoidable) penalty for having a high turnover problem.
It also costs money to replace those terminating. All preemployment physicals are done by Boimetrics, Inc., an outside organization that charges $100.00 per physical. Advertising and employment agency fees run an additional $250.00, on the average, per termination, and personnel specialists spend an average of four more hours communicating job availability every time another employee quits. Preemployment administrative functions take another two and a half hours per terminating employee, and this excludes preemployment 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 $8.00 for materials and another $8.00 for scoring. Travel expenses average $50.00 per applicant, and one in every ten new hires is reimbursed an average of $36,000 in moving expenses. For those management jobs filled, a 90-minute staff meeting was also required, with a department representative (average pay of $22.75 per hour) present. In the last year seventeen meetings were held. Finally, post-employment acquisition and dissemination of information took 75 minutes, on the average, for each new employee. And of course all these replacements had to be trained. Informational literature alone cost $11.00 per package, the formal training program (run twelve times last year) takes four 8-hour days, and trainers make an average of $24.00 per hour. New employees made an average of $11.50 per hour, and 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 = $17.25 per hour). During training each experienced employee’s productivity dropped by 50 percent. Net DP (Difference in Performance) was +$100,000. What did employee turnover cost Ups and Downs, Inc., last year? How much per employee who left?