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58 Cost per Hour X Hours of Service = Total Cost (+) (-) Compensation Turnover Productivity (-) (-) Figure 4-6. Inter-relationships between compensation, turnover, productivity, and total cost. degree to which increased wages impact turnover and the turnover [illustrated by the negative (-) relationship between impact of years of experience on productivity would allow "Compensation" and "Post-Training Turnover" in Figure 4-7]. systems to set wages and compensation to minimize total Because post-training turnover has a direct relationship to the cost. This issue is explored more fully in Chapter 6. number of new hires needed [illustrated by the plus (+) sign in Figure 4-7], lower post-training can lower the number of new hires needed. Higher compensation can also lower per hire Compensation and Recruitment recruitment costs by creating a larger pool of more qualified and Training Costs potential new hires. Increased compensation can decrease the A second important set of inter-relationships exist between drop-out rate in training by both attracting more qualified new compensation--the wages and fringe benefits provided-- hires and by decreasing the number of trainees who feel that and recruitment and training costs. These inter-relationships the compensation does not match the demands of the job. are illustrated in Figure 4-7. As shown in Figure 4-7, recruit- Finally, more competitive compensation can lower retraining ment cost is determined by multiplying the number of new costs by developing a better workforce that requires less fre- hires needed per year by the per hire recruitment cost, where quent retraining. the number of new hires needed per year is determined by the A key for paratransit managers and transit systems is bal- total workforce requirement, training completion rates, and ancing the increased compensation costs against the savings post-training turnover. Training costs are determined by the in total recruitment and training costs. A better understand- number of new recruits multiplied by the per trainee cost. ing of the magnitude of the relationships and impacts illus- Compensation has several impacts on the factors in this trated in Figure 4-7 would help managers set the level of equation. Higher compensation can lower post-training compensation to minimize overall costs. Total # of New X Per Hire + Total # of - Training X Per Trainee + Retraining = Total Recruitment & Hires Needed Recruitment Cost New Hires Drop-Outs Cost Costs Training Cost (+) (-) (-) (-) Post-Training (-) Compensation Turnover Figure 4-7. Inter-relationships between compensation and recruitment and training costs.