Cost Of Turnover
The Cost of Turnover
- $14 Billion per Year: The cost paid by law firms for employee turnover
- 30% to 150% of Annual Salary: The cost to a law firm to replace a single employee
The Cost of Replacing Employees
- The cost to replace an employee is 30% to 150% of the yearly salary of the position for hourly employees (estimates from Cornell University, the Saratoga Institute, and independently by Hewitt Associates)
- Factoring in mentoring time and the cost of training and development, the loss of one junior lawyer can be as high as 3 times their annual salary
- Employee turnover rates erode client service, satisfaction and confidence, increasing client turnover
A study by the National Association for Law Placement (NALP) reports:
- Of attorneys hired straight out of law school, 9% will leave a law firm within their first year after law school
- 50 % will be gone by the end of three years, just as these associates are becoming profitable
- These rates are even higher among women and minorities
What is your Firm’s Annual Turnover Rate?
Assuming your firm is not currently maintaining monthly and/or annual headcount figures, below is a formula your firm can use in determining its turnover rate. The figures used below are illustrative of a firm of 150 employees at a year’s beginning.
| Your Firm’s Total Headcount in January: | 150 |
| Your Firm’s Total Headcount in December: | 158 |
| Your Firm’s Average Annual Headcount (Line 1 + Line 2 divided by 2): | 154 |
| Total number of terminations for the entire year (termination is defined as a permanent voluntary and involuntary terminations; does not include layoffs or death): | 20 |
| Annual turnover percent (Line 4 divided by Line 3 x 100): | 13% |
What is your Firm’s Annual Financial Cost of Turnover?
Assuming your firm does not currently measure the monthly and/or annual financial costs associated with turnover, below is a formula your firm can use in determining these costs. The figures used below assume the total cost of losing a single associate is 30% (the lowest end of the range) of the yearly salary of the position.
| Assuming Annual Salary of Second-Year Associate: | $75,000.00 |
| Assuming Annual Salary Plus Benefits (benefits typically cost 30% of annual salary): | $97,500.00 |
| Turnover Cost of Position: ($97,500 x 30%): | $29,250.00 |
| Total Number of Associates who left the during the year: | 20 |
| Total cost of turnover: $29,250 x 20 | $585,000.00 |
At the high end of the spectrum, this annual cost can be as high as $2,925,000.00.