We adapted our turnover cost methodology from the Legislative Service Office Program Evaluation entitled Turnover and Retention in Four Occupations dated May 2000.  After a series of discussions with the manager of the DFS licensing unit, changes were made to the methodology to tailor it specifically for the licensing unit.  Adaptations were made to account for the fact that all licensers who terminated their positions in calendar year 2000 were AWECs, or contract employees. 

To estimate turnover costs for child care licensers, we asked DFS to fill out a worksheet about the costs they incurred in the following four areas:  separation costs; vacancy costs; replacement costs; and training costs.  After we received the raw data from DFS, we estimated the costs of turnover using the methodology described below.  All costs were DFS-reported and were not verified by LSO.  The assumptions we make to calculate these costs are also noted.

Separation Costs
 

We calculated the turnover rate for child care licensers for calendar year 2000 from data provided by DFS.  We included all licenser terminations from the DFS licensing unit in the turnover rate.  We estimated turnover costs for licensers and not for supervisor/manager positions or for assistants. 

We calculated the hourly pay rate of departing employees by determining the average salary for departing licensers from data provided by DFS.  For full time permanent state positions, we included benefits in the wage costs we calculated.  We did not include sick and vacation leave pay outs in our turnover costs.  Although the agency incurs these costs when a permanent state employee separates, it is an unfunded liability for the agency.

SAO officials compiled cost information for administrative costs they incur when an employee separates service from the State. 

Separation Costs =

+          Unemployment benefits =

total claims paid + [ (weighted sum of the hourly pay rates of staff time to administer claims) x (number of claims filed) ]

+          Administrative costs =

[weighted sum of the hourly pay rates of staff time to process employee out x (number of turnovers - promotions] + [time of departing employee x hourly pay rate x (number of turnovers – promotions) + SAO costs]
 

+          Other separation costs identified by agencies

Vacancy Costs

DFS reported data provided us with the extra hours worked because of vacancies. We did not include offsetting savings that may accrue during turnover, such as salary costs, because there is room for debate about whether the salary savings represent a vacancy savings or cost. 

Vacancy Costs =
  

 Vacancy costs identified by agencies
 

Replacement Costs

We calculated the turnover rate for licensers from data provided by DFS.  We included all terminations from the agency in the turnover rate.  We estimated turnover costs for licensers and not for supervisor/manager positions.  Additionally, we did not include promotions to a supervisor or manager level in the turnover rate.  We assumed the number of turnovers equaled the number of positions to be replaced. 
 

We calculated the hourly pay rate of replacement employees by using the hiring rate reported by DFS.  We used this number to calculate the value of a replacement employee’s time, excluding benefits.

 SAO compiled cost information for administrative costs they incur when a new employee begins service with the State. 
 

Replacement Costs =
 

            Communicating job availability =

           
Total advertising + (weighted sum of staff costs to prepare ads) + (weighted sum of staff costs to meet with job service)

+          Screening candidates =

([(weighted sum of in-house screening costs for one application) x (number of applications per opening x number of turnovers)]

+          Interviewing candidates =

[(prep time and duration of interview x sum of pay rates of staff who conduct interview) x (number of interviews conducted for one position x number of turnovers)]
 

+          Selecting candidates =

            (weighted sum of staff costs to select a candidate) x number of turnovers

+          Administrative Costs =

[(weighted sum of staff costs to process a new employee) x number of turnovers] + [(time of employee to complete administrative functions x hourly pay rate) x number of turnovers] + SAO costs]
 

+          Other replacement costs identified by agencies
 

Training Costs
 

We calculated the turnover rate for licensers from DFS provided data.  We included all terminations from the agency in the turnover rate.  We estimated turnover rates for licensers and not for supervisor/manager positions.  We assumed the number of turnovers equaled the number of employees to be trained.
 

We calculated the hourly pay rate of trainees by using the starting wage for new employees reported by the agencies.  We used this amount to calculate the value of a replacement employee’s time, excluding benefits.

We estimated the costs of training during a new hire’s first year and not subsequent training provided by DFS.  A&I compiled information about costs they incur to provide the new employee orientation.  All other training costs were agency reported, and were not verified by LSO.
 

Training Costs =
 

A&I Orientation =
 

[(weighted sum of A&I costs to prepare and provide one training for one trainee) + (length of training x average pay rate of trainees) x (number of new employees who attend as a percent of turnovers)]

+          Formal Skills Training =

[(weighted sum of staff costs to prepare and provide one training + contract costs + materials + overhead, if offsite) x (number of turnovers/number of trainees per training)] + (length of training in hours x average pay rate of trainees x number of turnovers) + (daily per diem rate x length of training in days x number who travel) + (average travel costs x number who travel)]

+          Informal Training =

[(hrs per week spent mentoring x number of weeks) x (average hourly pay rate of staff who mentor) x  (reduction in productivity of experienced employee) x (number of experienced employees who mentor)] + [(hrs per week spent with mentor x number of weeks) x (average hourly pay rate of new staff) x (reduction in productivity of new staff) x (number of turnovers)]
 

TOTAL COSTS =

Separation costs + vacancy costs + replacement costs + training costs
 

COST PER TURNOVER =

Total costs/number of turnovers