Exit costs refer to the expenses a company incurs when employees leave the organization. These costs can be divided into three categories:
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Costs due to lost performance and efficiency: These are costs incurred when an employee’s performance or productivity declines before they leave the company.
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Vacancy costs: These costs arise when a position remains unfilled during the search for a new, suitable employee.
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Severance costs: These are the expenses associated with laying off an employee, including severance pay and benefits.
In a broader sense, the search costs for recruiting a new employee can also be included under exit costs.
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