Cost of Turnover

Turnover can cost a business A LOT of money. Some DIRECT costs associated with Turnover include:

• Recruitment costs

  • Advertising for the role

  • Recruitment Agency Fees

  • Time spent by your HR team

• Hiring Costs

  • Time spent by your hiring team interviewing candidates - this can be a lot depending on the salaries of your team and the level of the position you are hiring for your team. I have sat in rooms where the cost of the interview panel alone was $500 for that 1 hour.

  • Background Checks and other Pre-Employment Screening Processes such as Physicals, Reference Checks, Drug Testing, etc.

• Onboarding and Training Costs

  • Costs associated with orientation

    • Cost of the orientation team providing the orientation

  • Cost of the new hire training

  • Cost of the loss of productivity while the new employee gets up to speed.

  BUT…what about the indirect costs?

• Lost Productivity - the gap between the departing employee’s exit and the new hire reaching full productivity

• Overtime for Remaining Staff - Additional workload on the remaining employees, often leading to overtime pay and burnout

• Knowledge Loss - loss of institutional knowledge and experience, which can affect project continuity and team cohesion.

  Yet, that’s not all, folks…you’ve got the intangible costs…the ones that are hard to measure, but they are definitely expensive:

  • Impact on Morale and Engagement - the people still in their roles performing their own tasks and now having to take on the tasks of others. This can lead to frustrated employees and increased turnover. You may have employees willing to take on new tasks, but after a while this could lead to burnout and dis-engagement.

  • Customer Service Disruption - this could cost your organization relationships, as well as make it hard for others to get their jobs done if no one is performing this work, especially if the departing employee had customer-facing responsibilities.

  Turnover has a lot more costs than most people realize. It’s important to protect your organization from unhealthy turnover and ensure you are hiring and retaining the right people for your organization. EngageHR can help!

Let’s look at examples of turnover cost from each level in an organization to get a solid understanding of Turnover Costs:

• Entry-Level Employees - An employee making $50k will cost your company about 30-50% of their annual salary to replace. ie. 50,000 x 30-50% = $15k-$25k.

• Mid-Level Employees - An employee making $80k will cost your employee about 150% of their annual salary to replace. ie. 150% of $80k = $120k

• High-Level Employees - An employee making $150k will cost your company about 200-400% of their annual salary. ie. 200%-400% of $150k = $300k-$600k

The reasons there are such varying costs depending upon the level in your organization is due to three factors:

• Industry and Role: Specialized roles or those requiring extensive training can be more expensive to replace.

• Geographic Location: Costs can vary based on your local labor market conditions and cost of living.

• Company Size and Structure: Depending on the size of your company, larger companies have many more resources to help with turnover, while smaller companies are very limited, so the cost is higher for smaller companies.