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TURNOVER COSTS
1
Direct Support Professional Turnover Costs in Small Group Homes: A Case Study
2016
Sheryl A. Larson, Ph.D.
University of Minnesota
M.S. Anick Tolbize, Ph.D.
Rodrigues Public Schools, Mauritius
Ockjean Kim, Ph.D.
Minnesota State University, Mankato
Bob York, M.S.
Lutheran Services in America
University of Minnesota, Research and Training Center on Community Living
For more information:
Sheryl Larson, Ph.D.,
Research Director 3
University of Minnesota,
Research and Training Center on Community Living, 214B Pattee Hall, 150 Pillsbury Drive SE,
Minneapolis, MN 55455
Larso072@umn.edu
612-624-6024
Funding for the research described in this manuscript was provided by the National Institute on
Disability and Rehabilitation Research, U.S. Department of Education through a grant to the Research
and Training Center (RTC) on Community Living at the University of Minnesota (Cooperative
Agreement Nos. H133G980082 and H133B031116). Supplemental funding was provided through a
cooperative agreement from the Administration on Community Living, U.S. Department of
Health and Human Services Grant #90DN0297. Grantees undertaking projects under government
sponsorship are encouraged to express freely their findings and conclusions. Points of view or
opinions do not therefore necessarily represent official ACL or NIDRR policy.
Recommended citation: Larson, S.A., Tolbize, M.S.A., Kim, O., and York, B. (2016). Direct Support
Professional Turnover Costs in Small Group Homes: A Case Study. Minneapolis: University of
Minnesota, Research and Training Center on Community Living.
TURNOVER COSTS
2
Abstract
Turnover of direct support professionals (DSP) in community residential human service organizations
supporting persons with intellectual or developmental disabilities averages 52% and has been a problem
for decades (Larson & Hewitt, 2005). This paper examines the financial costs associated with DSP
exiting, recruiting and hiring a replacement, filling the vacated schedule, and training the replacement to
competence. This 2004 study estimated total turnover costs of $3,278 per leaver, representing 17.4% of
the annual salary plus benefits for a full-time DSP. The costs included $892 in separation costs, $437 in
hiring costs, and $1,949 for training a new employee to competence. The average frontline supervisor
spent 18% of her hours managing and training exiting and new DSPs.
Introduction
Annual turnover rates in community residential support settings for persons with intellectual or
developmental disabilities (IDD) averaged 52% in 13 studies conducted between 2000 and 2005 (Hewitt
& Larson, 2007) compared to turnover rates of 33% in large state operated IDD facilities (Larson,
Eschenbacher, Anderson, Taylor, Pettingell, Hewitt, Sowers & Fay, 2016). Reducing labor turnover has
been the subject of much research in organizational sciences and economics (Shaw, Delery, Jenkins &
Gupta, 1998), and models for determining costs associated with turnover have existed as far back as 1917,
when Fisher (1917) proposed a real and practical system for identifying the costs of turnover in
manufacturing plants. Such turnover costs calculators allow the conversion of human resources into
dollars. For instance, the University of Wisconsin-Cooperative Extension Center for Community
Economic Development (1996) estimated turnover cost to amount to $2,288 per individual after
surveying 78 companies. A review of seven studies conducted between 1992 and 2004 documenting
direct turnover costs among frontline employees in long term care using costing models similar to Cascio
(2000), provided a conservative estimate of direct costs associated with turnover of a direct support
professional of $2,500 (Seavey, 2004).
Turnover cost is frequently measured in terms of replacement, training and separation costs, as well as in
terms of lost revenue from decreased productivity (Steed & Shinnar, 2003). For instance, the Cascio
(2000) costing model includes direct costs associated with separation, replacement and training, as well as
indirect costs such as overtime and loss of productivity, while the Employee Turnover Calculator
(University of Wisconsin-Cooperative Extension Center for Community Economic Development, 1996)
also use terms such as separation costs, vacancy costs, replacement costs and training costs but does not
include lost productivity. Those costs may be further classified into three broad categories, including
employee-based costs, customer retention costs, and marketing costs to attract new customers (Fitz-Enz,
1997). Turnover costs may also be conceptualized as ‘hard’ or ‘soft’ costs. Hard costs may result from
instances when actual funds are disbursed, such as during termination, advertising and recruitment, while
soft costs may include hidden costs such as loss of customer relation and loss of productivity (Abbasi &
Holland, 2000).
Studies investigating the costs of turnover have often investigated employee-based hard costs. For
instance, costs that have been accounted for in most studies investigating turnover costs in the direct care
industry have included separation costs (Zahrt, 1992; Fullager et al., 1998; Seninger & Traci, 2002);
vacancy costs (Zahrt, 1992; Johnston, 1998; Fullager et al., 1998; Seninger & Traci, 2002; Vinfen
Corporation, as cited in Seavey, 2004); recruitment costs (Zahrt, 1992; Johnston, 1998; Fullager et al.,
1998; Seninger & Traci, 2002; Straker & Atchley, 1999; Vinfen Corporation, as cited in Seavey 2004;
Waldman et al., as cited in Seavey 2004); and cost of training and orientation (Zahrt, 1992; Johnston,
1998; Fullager et al., 1998; Seninger & Traci, 2002; Straker & Atchley, 1999; Vinfen Corporation, as
cited in Seavey, 2004; Waldman et al., as cited in Seavey, 2004).
TURNOVER COSTS
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Although turnover may be costly, it should not always be construed as a negative event. Instead, it should
be viewed as a trade-off between costs and benefits (Gray et al., 1996). Turnover may hold benefits if it is
functional, that is, if it results in the loss of poor performers, and if the hard dollar benefits outweigh
resultant costs (Hollenbeck & Williams, 1986). However, if resultant costs exceed hard dollar benefits
such as savings incurred from the lower salaries and lesser fringe benefits of new hires or the recovery of
pensions (Dalton & Todor, 1982), and if turnover is dysfunctional (Hollenbeck & Williams, 1986) and
results in the loss of desirable employees, then, it is genuinely problematic. Therefore, in industries where
the differences between the salaries and benefits of new and older employees are not significant enough to
lead to significant hard dollar savings following turnover, and where employees who have desired
competencies and attributes such as good relationships with the consumer may be lost, the costs of
turnover may very likely outweigh its benefits. Such may be the case for community residential support
settings.
Furthermore, in such settings, employees need to be competent in numerous areas, and time spent on
duties resulting from turnover may detract remaining employees from being as effective in those areas.
For instance, community residential support settings frontline supervisors need to be effective in 14 broad
competency areas including staff relations, supporting consumer support networks, staff training, health,
and safety and maintenance (Larson, Doljanac, Nord, Salmi, Hewitt, & O’Nell, 2007), and time spent on
turnover-related activities may limit time spent on one those competencies. Therefore, in community
residential support settings, costs of turnover may very likely outweigh the benefits.
While numerous factors may contribute to turnover costs, they often depend on the level of investment
(Shaw et al., 1998) and are often directly related to the amount of job-specific training a post requires
(Gray, et al., 1996). Indeed, some studies have reported training-related costs as the highest cost
associated with turnover (Fullager et al., 1998; Leon, Marainen & Marcotte, 2001; Zahr, 1992).
Furthermore, if the new worker is less productive than the previous one, the already elevated cost of
turnover may be compounded. The extent to which training will contribute to the costs of turnover in an
organization may however depend on who is paying for the training (Gray et al., 1996). However, the link
between training and turnover is far from simple, thus complicating the management of turnover. While
inadequate training is often cited as a reason for turnover (Hall & Hall, 2002), conversely, trained workers
may move towards higher paying organizations more easily (Glance, Hogg & Huberman, 1997).
Therefore, while organizations where training requirements are low may suffer from high rates of
functional turnover due to the forced or voluntary departure of employees whose performance on the job
may have suffered from the lack of training; organizations where training requirements are high may
ultimately experience high rates of dysfunctional turnover, as employees whose performances are above
average following training, leave for other settings where their competencies may be better compensated.
Furthermore, although turnover is often a result of poor salaries and benefits, increasing salaries across
the board may not be a cost-effective method of reducing turnover. For instance, in a labor force of 200
full-time nurses experiencing an annual turnover rate of 15%, a 5% improvement in relative pay was
estimated to reduce turnover and the estimated total gross costs of turnover by 6%. However, the cost to
saving ratio was ineffective and ranged from 19:1 for the lower bound estimate turnover cost to 166:1 for
the upper bound estimate (Gray et al., 1996). This cost to saving ratio might be lower depending on job
classification however, but is nevertheless not effective. For instance, it was between 80:1 and 9:1 for
part-time registered nurses and between 54:1 and 6:1 for part-time care assistants. However, in instances
when employees have a 100% likelihood of quitting their jobs within 12 months, or when the turnover
rate is approximately 50%, directing the pay increase towards those highly probably leavers might be a
more cost-effective method. By increasing the pay of such employees, the targeted pay rise could possibly
result in savings that might cancel or outweigh the cost of the pay rise (Gray et al., 1996).
TURNOVER COSTS
4
The cost-effectiveness of targeted pay rise however rests on the assumption that although pay rise will
have an effect on turnover; it will not automatically prevent an employee from leaving their posts (Gray et
al., 1996). Therefore, focusing solely on targeted pay rises might not be fully effective in reducing
turnover. Similarly, while increasing training may lead to a decrease in turnover due to inadequate
training, the option of not providing ‘too much’ training so as to limit dysfunctional turnover is not an
ethical option and may also contribute to turnover for other reasons. Therefore, focusing solely on
training as a means of reducing turnover may also not be an effective option, as providing training in and
of itself may not guarantee retention, and in some cases may even increase turnover.
Other effective alternatives to reducing the rate of turnover in small community group homes exist
however. For instance, a change in staff-scheduling system was associated with a decrease in the number
of staff members involved in the daily care of adults with IDD in community settings and a decrease in
staff vacancies without reducing staff to client ratios and with less cost than the 2% to 3.5% average
annual increase within this agency (Srouse, Carroll-Hernandez, Sherman & Sheldon, 2003). Family-
teaching homes were found to be even better methods of reducing turnover, as they were associated with
significantly better direct care, staff stability and lower costs (Srouse et al., 2003). Realistic job previews
(RJPs) describe both positive and negative aspects of a job to an applicant before a job offer is extended.
In a meta-analysis on the effects of RJPs on multiple organizational outcomes found RJPs to be an
effective method of reducing turnover (Rynes, 1991). RJPs delivered just before hiring and provided in a
two-way communication process instead of in written format are effective in reducing both voluntary
turnover and general turnover (Phillips, 1998).
Although such options appear to be feasible and cost-effective, there is nevertheless a need to tailor
practices aimed at reducing turnover in small group home settings. In 2014, of the estimated 273,191
people with IDD who received long-term supports and services in group IDD settings, 175,105 (63%)
lived in settings shared by six or fewer people, and another 55,434 (20%) lived on settings shared by
seven to fifteen people (Larson et al., 2016). Small group homes commonly report low wages, limited
benefits and insufficient funds for training as well as a perpetually high rate of turnover (Research and
Training Center on Community Living, 2006). Calculations of turnover costs in such instances are not
only estimations of how much an organization may lose or save as a result of turnover, but may also
provide the basis for choosing practices tailored to the reduction of turnover within the specific contexts
created by small community settings. For example, identifying training as costliest part of turnover may
have different implications than identifying advertising as the costliest aspect. While the cost of
advertising can be reduced by choosing more cost-effective methods, the costs associated with training
may not necessarily be reduced merely by choosing more cost-effective methods of delivering training, as
training is often a factor of the number of new hires, the average cost of training per worker and the level
of turnover (Leon, et al., 2001). Furthermore, the sources of costs may suggest whether to focus more on
improving practices that take place prior to hiring, as opposed to changing practices that take place once
an individual has already been hired. Therefore, different types of costs will lead to different implications
for practice. Based on the assumption that turnover involves a trade-off between costs and benefits, and
that in small community settings, costs may far outweigh benefits, identifying the sources of the costs
associated with turnover may further highlight the need to change current practices, and find cost-
effective methods of preventing and reducing turnover. In the current study, the greatest source of hard,
employee-based costs associated with turnover were calculated using a model derived from Cascio
(2000). Method
Participants
This study examined turnover costs in small group homes supporting adults and children with intellectual
or developmental disabilities in a statewide multi-service agency in a Midwestern state. At the time of the
study, this organization provided residential services to 685 individuals with intellectual or developmental
TURNOVER COSTS
5
disabilities (IDD) in 117 Medicaid funded group homes. In 2004, this organization employed 962 DSPs
and 52 frontline supervisors (FLS). Turnover in 2004 for DSPs was 52% (ranging from 0% to 300% in
individual group homes) and for supervisors was 23%. A total of 86% of the DSPs and FLS were women,
and 85% were white. Of the remaining employees, 9% were black, 1% were Hispanic, 0.7% were Asian,
1.8% were Native American, and 3.1% did not report their racial or ethnic background. Only 33% of DSP
employees were eligible for benefits such as paid time off and health care. The average DSP worked 20.4
hours per week. The average tenure of current DSP and supervisory employees was 42.9 months and of
leavers was 27.5 months. A total of 29% of all leavers left the organization within 6 months of hire, and
17% left between 7 and 12 months after hire.
A total of 6 managers, 12 Supervisors, 9 Lead DSPs and 6 Human Resources staff provided time study
information for this project. Of those, 20 provided information about costs associated with exiting
employees, 24 provided information about costs associated with hiring new DSPs, and 32 provided
information about costs associated with training new DSPs during their first 90 days of employment (see
Table 2).
Measures
The Cascio (2000) model for estimating the costs associated with employee turnover includes four
components: separation costs, replacement costs, training costs, and cost related to difference in
performance. The current study estimated DSP turnover costs based on the first three components of
Cascio’s model. Differences in performance were not measured directly but the cost of double staffing
required while a new employee was involved in on-the-job training was included.
Separation Costs. In the current study, separation costs were defined as costs accrued during the
process of an existing employee’s departure from the organization. Separation costs per leaver were
measured as follows:
Separation Costs = Administrative Cost for terminating an employee + Overtime + Temporary
Help to Cover Vacancy
Replacement Costs. Replacement costs were costs related to the hiring of a new employee to
replace a leaver. Replacement costs per new hire were measured as follows:
Replacement Costs = Cost of Attracting Applicant + Pre-Employment Administrative Cost +
Cost of Entrance Interviews + Cost of realistic job previews + Cost of
Employment Decision.
Training Costs. Training costs involved expenses incurred to orient and train newly hired
employees to equip them with basic competency and skills required to assume regular job duties. Training
costs per new hire were measured as follows:
Training Costs = Cost of training materials/literature + Cost of formal training + Cost of informal
training + New hire personnel file preparation
Material costs. Material costs were computed from a log which specified the number of various
materials distributed. Costs were calculated by multiplying the cost per item (e.g., paper, envelop) by the
number of items used for each leaver or new hire.
Table 1 shows the operational definition for each cost category and the relevant cost elements from
Casio’s 2000 model.
TURNOVER COSTS
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Table 1. Cost Categories for Terminating, Hiring and Training Direct Support Professionals
Category
Cascio (2000)
Operational Definition
A. Separation Costs
Exit Interview
Exit Interviewer's
Time
Time spent by HR and supervisors on exit interviews/survey x
hourly wage
a
Administrative
Costs
Human
Resources
Functions related
to Termination
[Time spent by the HR department in functions related to
termination x average HR hourly wage] + sum of materials
costs as documented by materials log per leaver
Separation Pay
Separation Pay
Not applicable
Additional
Overtime/
Temporary
Employee Costs
[Number of overtime hours per week per vacancy x weighted
average overtime wage x number of weeks position vacant] +
[Number of temporary help hours per week per vacancy x
hourly cost of temporary help x number of weeks position
vacant]
Unemployment
Tax
Change in
Unemployment
Tax Rate
Information not available
B. Replacement Costs
Cost of
Attracting
Applicants
Cost of
Communicating
Job Availability
Cost of advertisement per target year / Total number of new
hires
HR Time/cost for
Communicating
Job Availability
Total time spent developing an advertisement per new hire x
average HR hourly wage
Pre-
Employment
Administration
HR Time/cost for
Pre-Employment
Admin Functions
Total costs of materials as documented by materials log of each
informant per person + [time taken to receive and review
applications and contact applicants x average HR hourly wage]
Employment
Agency Fees per
Termination
Not applicable
Entrance
Interviews
Interviewer's
Time/Cost
required for
Entrance
Interview
∑[Time required for hiring interviews for each interviewer x
interviewer hourly wage] + [hours spent by supervisor
implementing a Realistic Job Preview with all applicants x
average supervisor hourly wage]
Costs of
Employment
Decision
Testing
(Materials +
Scoring)
Cost of background check and driver’s license check
Staff Meeting
Time spent by hiring personnel on background check and for
making hiring decision per hire x HR or supervisor hourly
wage
Applicant
Travel &
Moving
Expenses
Travel/Moving
Expenses
Not applicable
TURNOVER COSTS
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Table 1. Cost Categories for Terminating, Hiring and Training Direct Support Professionals
Category
Cascio (2000)
Operational Definition
Post-
Employment
Administration
Post-employment
Acquisition &
Dissemination of
Information
Number of HR personnel x number of hours spent on post-
employment functions x average HR hourly wage
Post-employment
Medical Exams
Cost of Hepatitis B Vaccinations
C. Orientation And Training Costs
Training
Materials
Informational
Literature
∑ [Unit price of each material used for initial training and
orientation x Quantity of each material used per hire]
Formal
Training
Formal Training
Costs for Trainer
∑ [Number of hours spent for each formal training session x
average pay rate of trainer(s)/number of trainees per training
session]
Formal Training
Costs for
Replacements
(New Employee)
[Total number of hours spent in training x average wage for
new employees] + [tuition or registration fees paid for training
delivered by an outside entity]
Informal
Training
Costs for
Instruction by
Experienced
Employees
[Hours spent delivering informal training by supervisor per hire
x supervisor hourly wage] + [hours of extra staffing during the
training period x new employee hourly wage]
Costs for
Instruction for
(New) Employee
Average double-staff hours in 30 days X new DSP average
wage
New Hire
Personnel File
Prep
Time spent by HR or Unit supervisor to develop a new
employee file x average HR or supervisor wage
Differential
Performance
Performance
Difference
between Leavers
& Replacements
Cost for double staffing during informal training (measured
under informal training
aNote: Hourly wage includes both salary and benefit costs for the average employee in the job
classifications involved in the activity.
Procedure
A list of informants included all Human Resources and administrative office personnel, and a stratified
purposeful sample of managers, frontline supervisors and lead Direct Support Professionals from different
parts of the state. A letter of introduction and project information was mailed to nominated staff and
supervisors using the contact information provided by the agency administrator. A follow up phone call
was made to provide more detailed information and answer questions raised by informants. Employees
who agreed to participate and act as informants received a consent form. After the signed consent form
was returned, a packet of instruction and the instrument developed for the project was delivered. If a
supervisor from a home declined to participate, the agency administrator was contacted to nominate
another eligible supervisor. A total of 20 staff members reported data on the cost of exiting employees, 24
reported on hiring costs, and 32 reported in training costs (See Table 2).
TURNOVER COSTS
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Project staff maintained regular contacts with the informants to resolve questions and potential difficulties
in completing the instrument. Time study information was collected for four weeks on the number of
hours spent on exits, hiring and training of new DSPs. In addition, the number of DSPs who left the
agency during the one-month period as well as number of DSPs hired was tracked using the human
resources data base.
The human resources database was consulted to identify total numbers of employees in each job
classification, the number of stayers and leavers by job classification and average salaries for current
employees by job classification. Hourly costs were computed by summing of the average annual salary
for persons in each job classification, annual costs for medical/dental and other benefits for the average
employee in the category (weighted by the proportion of persons in each job classification in each
benefits tenure category) divided by the number of regular hours worked per year (2,080). Separate
hourly costs were identified for the following job classifications: Managers (area director, director, and
program manager), frontline supervisor, direct support professional (DSP) lead, human resource
employees, internal trainers and DSP excluding DSP lead.
Results
Cost Per Leaver
In 2004, when one DSP left and was replaced, an estimated $3,278 in costs were incurred (See Table 3).
Training and replacement costs accounted for 73% of the total costs incurred ($2,386) while separation
costs accounted for 27% of total costs incurred ($892). Of the three activities associated with turnover,
training of the new DSP was the costliest, and represented 59% of costs incurred ($1,949). Cost of
materials including supplies and long distance phone calls was negligible ($16) when compared to cost
associated with salaries of staff ($1,550) and activities that fell under the “other” category ($1,712).
Table 3 Cost of Turnover Per Person Leaving/Hired in 2004
Component
Leaving
Replacement
Training
Total
Manager/Supervisor/HR time
$ 156
$ 358
$ 1,036
$ 1,550
Materials
$ 4
$ 10
$ 2
$ 16
Other
$ 732
a
$ 69
b
$ 911
c
$ 1,712
Total
$ 892
$ 437
$ 1,949
$ 3,278
“Other” cost components: a Leaving/Separation, Overtime hours, Temporary agency staff hours,
Supervisor works extra DSP hours. b Hiring: Advertising, Background check, Driver/Motor Vehicle,
Hepatitis B vaccination. c Training: External trainers- medical administration, CPR, First aid,
documentation, VA training, and diabetes; Internal Trainer; Trainee Wages.
Annual Turnover Costs
The per leaver costs were used to calculate the costs associated with the resignation of 496 DSPs and the
hiring and training of 449 new DSPs over a one-year period. In an organization employing 962 DSPs with
Table 2 Respondents by Job Classification for each Cost Component
Staff Category
Exits
Hiring
Training
Managers
6
6
5
Frontline Supervisors
8
8
12
Lead DSPs
4
5
9
Human Resources Staff and Trainers
2
5
6
Total
20
24
32
TURNOVER COSTS
9
a 52% turnover rate the estimated annual cost of turnover was $1.5 million (see Table 4).
Table 4 Estimated Annual Cost of Turnover for 496 Leavers and 449 New Hires in 2004 by
Component
Component
Leaving
Replacement
Training
Total
Manager/Supervisor/HR time
$77,419
$160,695
$465,264
$703,378
Materials
$1,913
$4,268
$993
$7,174
Other
$363,089
a
$31,203
b
$408,853
c
$803,145
Total
$442,421
$196,166
$875,110
$1,513,697
“Other” cost components: a Leaving/Separation, Overtime hours, Temporary agency staff hours,
Supervisor works extra DSP hours. b Hiring: Advertising, Background check, Driver/Motor Vehicle,
Hepatitis B vaccination. c Training: External trainers- medical administration, CPR, First aid,
documentation, VA training, and diabetes; Internal Trainer; Trainee Wages.
Itemized turnover expenditures
Cost of turnover quantifies one aspect of the impact of turnover on an organization. This study estimated
the costs based on leaving, replacement and training (See Tables 2 and 3). However, for an organization
to use information about the cost of turnover to make financial decisions, those costs must be separated by
type. Cost types include the wages and benefits paid to employees for the time they spend in the turnover
process, DSP wages and benefits during orientation and the first 90 days of training, DSP wages and
benefits for overtime to fill vacant positions, cash costs for advertising, background studies, hepatitis B
vaccinations, fees for external trainers and material costs. Knowing the costs in each of these categories
can help an organization analyze the resources (time and money) that would be made available if turnover
was reduced.
Time spent by employees on duties directly associated with turnover, including the delivery of training,
accounted for 71% of all turnover related expenditures (See Table 5). Overtime performed by DSPs due
to vacancies accounted for 9% of all costs incurred due to turnover. Payment of trainee wages for new
employees accounted for about 16% of all costs incurred due to turnover. The cost associated with
advertising, background studies, Hepatitis B vaccinations and external trainers represented only about 3%
of the total costs, and the cost of materials accounted for less than 0.5% of total costs incurred. The
difference in totals between Tables 4 and 5 is due to rounding.
Table 5 Estimated Reduction in Cost Associated with a 50% Reduction in Turnover
Costs By Component
Per
Leaver
Annual
Cost 2004
Estimated Cost
with 50%
Reduction in
Turnover
Time spent by salaried employees
$2,350
$1,084,646
$582,867
DSP Orientation and Training wages and benefits
$542
$243,187
$134,322
DSP Overtime due to vacancies
$263
$130,512
$65,256
Advertising, Background Studies, Hepatitis B, External
Trainers
$107
$48,173
$26,608
Materials
$16
$7,177
$3,864
Total
$3,278
$1,513,696
$812,917
Because the total cost of turnover is dependent on both the number of leavers (496 in this study) and the
number of new hires (449 in this study), calculating costs savings due to a 50% reduction in DSP turnover
TURNOVER COSTS
10
rate (from 52% to 26% for this organization) is a bit more complex than simply dividing total costs by
two. Table 5 takes these complexities into account and shows the estimated total annual cost of turnover if
turnover was cut in half in the studied organization. We estimate that if turnover is cut in half, total
turnover related expenditures for this organization would decline from $1,514,000 to $813,000. Costs of
employee time (wages and benefits) spent supporting exiting employees and hiring and training new
employees would decline from $1,084,000 to $583,000 per year. This would free up $501,000 per year
($520 per DSP) of supervisor, administrator and human resource staff time to focus on other activities
such as improving the quality of services. In addition, if turnover rates were cut in half, annual cash costs
would be reduced from $429,000 to $230,000 (a cash savings of $199,000 in an organization employing
962 DSPs or $207 per DSP per year). This is equivalent to about 1% of the wage plus benefit cost per
hour per DSP. This cash would be available for recognition, salaries and benefits, or other initiatives to
retain DSPs and reduce turnover.
Administrative and Management costs of turnover
The time study results allowed us to estimate the percentage of annual salaries plus benefits paid to
persons in each of the studied job classifications for their work in supporting exiting DSPs and replacing
and training their replacements. We estimate that managers devoted 7% of their time annually on duties
resulting from staff turnover; frontline supervisors, 18%; lead DSPs 2%; and HR personnel 21% (see
Table 6). For managers, their time was distributed evenly across tasks associated with exiting DSPs,
hiring DSPs, and training DSPs during the first 90 days. Frontline supervisors spent an average of a day a
week working with exiting employees and hiring and training their replacements. They spent 2% of their
total hours supporting exiting DSPs, 4% of their time hiring replacement DSPs, and 12% of their time
training new DSPs during the first 90 days of employment. For Human Resources personnel who earned
21% of their annual salary plus benefits engaged in these activities, 1% of their time was spent
completing paperwork related to exiting DSPs, 16% of their time recruiting and hiring replacement DSPs,
and 4% of their time supporting training of new DSPs.
Table 6 Proportion of Salary Earned On Tasks Associated with DSP Turnover by Job
Classification
Job Classification
Exits
Replacement
Training
Total
Managers
2%
2%
3%
7%
Frontline Supervisors
2%
4%
12%
18%
Lead DSPs
0%
0%
2%
2%
Human Resources Staff
1%
16%
4%
21%
Turnover costs represented 17.4% of the annual wages of one full-time DSP or 34.8% of the annual
wages of a DSP working 20 hours per week. This figure provides a shorthand mechanism for estimating
turnover cost of a given agency. The unique cost of turnover for an organization can be computed if the
number of DSPs who leave per year and annual salary of one DSP is known. Annual cost of turnover =
17.4% (A x N), where A is annual salary for one DSP and N is the number of DSP leavers per year.
Discussion
Turnover cost was defined as the sum of the costs associated with separation of a DSP from the agency
plus the costs associated with hiring and training a new DSP. Similar to previous findings (Zhart, 1992;
Fullager, et al., 1998; and Leon, et al., 2001) the bulk of turnover costs were for training new employees.
Nearly $2,000 was spent on training per new hire ($875,000 total). However, the relationship between
training and turnover is complex, and merely decreasing training costs as a means of decreasing turnover
costs is not an effective option. Thus, the purpose of interventions aimed at reducing turnover should
focus on turning the costs associated with training into benefits, as opposed to merely reducing costs
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associated with training. Reducing costs associated with turnover once an employee has been hired are
complex. For instance, increasing employees’ salaries and benefits may not be cost-effective and
decreasing training or increasing training may not be effective as it is the highly trained employees and
those with fewer skills who are most likely to leave an organization.
However, increasing training to limit turnover due to inadequate training, in conjunction to ensuring that
employees are well-matched to the jobs for which they have been hired may ensure that well-trained
employees do not leave because the job does not meet their expectations, hence, the need for methods that
allow better screening of employees and providing RJPs to applicants. Furthermore, although salaries and
benefits increase across the board may not be cost-effective, increasing and standardizing salaries and
benefits at levels that allow individuals who are well-matched to their jobs and well-trained to not leave in
search of greener pastures, might be an issue that need to be tackled at the policy level, given that benefits
might outweigh costs for an organization, depending on who is paying for the different activities that are
taken into account during the turnover cost-benefit analysis. Once those methods are in place, such
methods as better scheduling and family-teaching homes (Srouse et al., 2003) might be implemented to
further reduce turnover. Therefore, the current results indicate a need for ensuring that employees’
competencies and expectations match the jobs for which they are hired. The results also suggest that
although increases in salaries and benefits may further contribute to a reduction in turnover, for such
increases to be cost-effective, the costs should be borne by parties other than the employers.
The cost to replace one DSP was estimated to be 17.4% of DSP wages plus benefits. From the time a DSP
resigned, and a new DSP was hired and trained, $3,278 was spent (an annual expenditure of
approximately $1.5M in the studied organization). Of this figure, 27% were cash costs and 73% were
costs of salaries and benefits for supervisors, managers and HR professionals specifically to support
exiting DSPs, and finding and hiring their replacements. These resources could have been devoted to
retaining DSPs and improving service quality but were instead used to replace DSPs who left. Such
results indicate as might be expected that reducing turnover would save cash on such items as advertising
and overtime, and in addition, would lead to a more efficient use time of salaried employees. If turnover
could be reduced, cash savings on such items as advertising and overtime could be reinvested to increase
wages of low-paid DSPs, providing performance bonuses or increasing the proportion of DSPs who are
eligible for paid time off and health care. Furthermore, time not spent on duties related to turnover could
be reallocated to improving supervision and supports to improve and support staff retention.
The time study revealed that supervisors spent 18% of their time or about seven hours per 40-hour work
week on activities associated with DSP turnover. Supervisors have many responsibilities and to be
effective, need to be competent in 14 broad competency areas ranging from staff relations, to supporting
consumer support networks, to staff training to health and safety and maintenance (Larson et al., 2007).
Therefore, decreasing turnover, and time spent on turnover related activities may leave supervisors with
more time to spend on their actual duties, which may ultimately reduce the rate of turnover as well.
Cost associated with the purchase of materials was negligible. Collecting data to estimate materials costs
was difficult and time consuming. Given the small proportion of overall costs accounted for by this
category (0.5%) we would recommend that organizations providing community residential supports to
persons with IDD who wish to study costs associated with DSP turnover focus their resources on
measuring other cost components.
Limitations
The most important limitation of the current study was that data was collected from only one, albeit large,
organization. Thus, caution is advised in applying the exact costs to organizations in other states, and of
different sizes. Additional research is needed to assess the impact of varying turnover rates, supervisor to
TURNOVER COSTS
12
DSP salary differentials, benefit schedules and other factors on the costs of turnover.
Another limitation of the study was its focus on only three direct, employee-based hard costs of turnover:
separation, replacement and training. Other turnover costs such customer retention costs, marketing costs
to attract new customers, and loss of productivity were not examined. This study focused on three
employee-based hard costs which may underestimate the total turnover costs. Since the study was
completed in 2004, it is important to adjust the salary costs to match current expenditures to estimate
contemporary costs. This study is based on the assumption that benefits associated with turnover are very
limited, and unlikely to outweigh the costs. A cost-benefit analysis of turnover in community residential
settings would provide further evidence to test this assumption.
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