How to calculate the real cost of an employee?

Most enterprises narrowly understand employee turnover costs as tangible costs such as turnover costs (cash cost of employee turnover) or replacement cost (recruitment advertising cost), while ignoring other related costs, especially intangible costs such as productivity decline caused by employee turnover. In fact, the intangible cost of employee mobility is much higher than the tangible cost of employee mobility.

When discussing or analyzing employee turnover, especially employee voluntary turnover, middle and senior managers in most enterprises often only think about the current loss or loss of human resources, but ignore or underestimate the special economic losses caused by employee turnover and the long-term impact of employee turnover on enterprises.

A common problem of enterprise managers is that they often don't believe that existing employees can be trained and developed to meet the requirements of enterprise development, but they are convinced that newly recruited employees have extraordinary abilities. Therefore, people often find that the top management of these companies are unwilling to pay competitive wages to existing employees, but are willing to pay new strangers 30%-50% higher wages than the original employees. This is an important reason for the high employee turnover rate in some enterprises, which leads to the rising cost of employee turnover.

At present, almost no enterprise includes a complete employee turnover costs (tangible and intangible) budget in its annual budget, but only some tangible cost budgets such as recruitment expenses and economic compensation for employees leaving their jobs.

The vast majority of middle managers in enterprises are indifferent to the cost of staff turnover in their own departments, including tangible costs, because tangible costs are often the budget category of human resources departments.

The middle and senior managers of most enterprises don't realize that the cost of employee turnover has become a black hole in today's enterprise management and an invisible killer of bottom line profits.

The human resources departments of most enterprises have calculated the annual or monthly turnover rate of employees, but due to the lack of understanding of the importance of calculating employee turnover costs, the specific composition, model and calculation formula of turnover costs are not clear, and the turnover costs of employees, especially intangible costs, cannot be calculated or fully calculated.