How much does employee turnover really cost your business?

HR Pulse

December 26, 2023

Explore the hidden costs of employee turnover and discover strategies for improving retention and enhancing your workplace's productivity.

Employee turnover can be costly for organizations, and the expenses associated with it can vary depending on several factors, including the industry, the level of the position, and the specific circumstances of the departure. 

It's important to note that these costs can add up, and the true cost of turnover is not always immediately apparent. Organizations often calculate the cost of turnover as a percentage of the departing employee's annual salary, and estimates can range from 30% to 150% or more.

Here are some common costs associated with employee turnover:

Recruitment and Hiring Costs:

  • Advertising job openings
  • Recruiter fees
  • Applicant tracking system expenses
  • HR staff time for screening and interviewing candidates

Onboarding Costs:

  • Training materials
  • Mentorship and training programs
  • Employee orientation sessions
  • Onboarding personnel and administrative tasks

Productivity Loss:

  • Reduced productivity during the time a position is vacant
  • Learning curve for new hires
  • Impact on team dynamics and collaboration

Employee Exit Costs:

  • Exit interviews and associated administrative tasks
  • Processing paperwork for termination

Replacement Costs:

  • Recruitment and hiring costs for the replacement
  • Onboarding and training for the new employee

Impact on Morale and Engagement:

  • Decreased morale and engagement among remaining employees
  • Potential negative impact on team culture

Customer Impact:

  • If the departing employee had direct customer relationships, there might be a loss of business or customer dissatisfaction

Knowledge Loss:

  • Loss of institutional knowledge and expertise that the departing employee possessed

Legal and Compliance Costs:

  • Potential legal fees if the departure involves legal issues or disputes
  • Costs associated with ensuring compliance with labor laws and regulations

Temporary Staffing Costs:

  • If temporary staff is brought in to fill the gap during the hiring process

Reducing turnover and investing in employee retention strategies can help mitigate these costs and contribute to a more stable and productive work environment.