The Cost of Nonprofit Accounting Employee Turnover
Employee turnover is no stranger in the nonprofit world.
Although it’s difficult to get reliable and current statistics by position types, an annual rate of 25% is a fair overall benchmark. This article shows how your nonprofit can calculate this rate and why it is significant.
How to calculate your nonprofit’s overall benchmark
Simply stated, count the number of employees separated over an annual period and divide that by the average number of employees of the same period.
(Beginning + Ending Number of Employees) / 2
This formula can be modified to focus on a department like accounting. Also, take into account seasonal variations and special events or circumstances. But, for discussion purposes, let’s use 25%.
Is turnover in a nonprofit good or bad?
The reality is that some turnover is good. More specifically, it helps weed out marginal employees (over-paid and under-performing). Plus, not doing this has an associated cost and perpetuates a continuing drag on the nonprofit.
You need to further qualify the rate by who is leaving and who is staying, particularly in today’s very competitive job market. If high performers are leaving, you must ask why and institute corrective measures.
Here are a couple of informative articles which go into greater depth on evaluating employee turnover and what to do about it.
- PayScale.com – Turnover: The Good the Bad and the Ugly
- Workable.com – How to Calculate Employee Turnover Rate
Getting to the nonprofit cost of employee turnover
Assuming your nonprofit’s turnover rate is in the range of 25%, and tends on the bad side because your better employees are leaving, what is the cost? Some of the more quantifiable costs that will affect the bottom line are:
- Advertising and recruitment fees
- Personnel time spent on screening and interviewing
- Personnel time spent on onboarding and training
- Lost productivity
Again, for discussion purposes, let’s put a price tag on the loss of an employee comprised of the above components.
A reasonable estimate of the extra cost of losing an employee is 30% of the departing employee’s annual salary. Assuming the salary is $60,000, the cost to the nonprofit is $18,000. Then, multiply this by the number of departing employees.
Likely more nuanced and harder to measure costs are those related to long-term growth and sustainability. A fix may require major strategic changes in human resource management and the nonprofit’s culture.
How does employee turnover relate to outsourced nonprofit accounting services?
Hiring an outsourced nonprofit accounting firm can save money. Also, that saving can be further enhanced by eliminating or mitigating employee turnover. Further, as discussed in other articles, outsourcing does not have to be an all-or-nothing proposition. It can be customized to deliver the best results to the nonprofit. If you’d like to know more details on how outsourcing can help your organization, read this article.