Calculate ROI

In the last exercise, you identified that the turnover rate of employees in 0 to 10 percent salary hike range is higher as compared to 11 to 15 and 16 to 20 percent salary hike range. Also, as per your model, percent_hike is one of the topmost drivers of turnover.

Now, let's assume that if all employees who received a salary hike between 0 and 10% were instead offered a hike between 10 and 15%, there is a very good chance that we would have been able to retain most of the employees.

It is estimated that successful retention of an employee at the Analyst level saves approx. $40,000 USD to the company. Of course, increasing the salary hike is an extra cost to the company. So in this exercise, you will calculate the return on investment (ROI) for increasing the employee's salary.

Two variables, the median salary of an analyst (median_salary_analyst) and the savings due to a successful intervention (turnover_cost) are available in your workspace.

This exercise is part of the course

HR Analytics: Predicting Employee Churn in R

View Course

Exercise instructions

Compute extra_cost incurred for an analyst if their hike was increased to 15% instead of 10%, i.e., if their salary was increased by 5%.
Assume higher increments were given, which led to the lower turnover rate of 15% from the original turnover rate of 32%. Calculate the savings due to the reduction in turnover rate by 17%.
Run the given code to calculate the ROI.

Hands-on interactive exercise

Have a go at this exercise by completing this sample code.

# Compute extra cost
extra_cost <- median_salary_analyst * (___)

# Compute savings
savings <-  turnover_cost * ___

# Calculate ROI
ROI <- (savings / extra_cost) * 100

# Print ROI
cat(paste0("The return on investment is ", round(ROI), "%!"))

Edit and Run Code