The Ridiculously High Cost of Employee Turnover

October 11, 2022 Workhuman Editorial Team

There are many reasons most employers strive so hard to retain their employees.

For starters, the cost of employee turnover is often 1.5 to 2 times the amount of the exiting employee’s salary.

But there are hidden costs too — costs that extend beyond what it takes to advertise the position, train the new hire, and recover lost productivity.

Those hidden costs can drastically affect companies’ bottom lines and company culture. The solution can save valuable time, energy, and money, and implementing it is simpler than you might think.

Why Does Employee Turnover Matter?

Reducing employee turnover should be a top priority for businesses. Here’s why:

Employee Turnover Lowers Morale

When employees see their co-workers leaving, they often take time to reflect on why. This reflection can damage morale and hurt company culture.

While you can’t prevent everyone from leaving, reducing the reasons they have to leave can improve the satisfaction of everyone within the organization.

What’s more, high turnover rates can ruin your company’s reputation and hurt your ability to attract talent.

The Cost of Employee Turnover Is High

There are various figures out there about the true cost of employee turnover, and even the most optimistic among them seems bleak.

According to, the average cost of replacing an hourly employee is $1,500. For those in technical positions, it’s 100% to 150% of their salary. For C-level positions, the cost is higher still — up to 213% of their salary.

Employee Turnover Decreases Productivity

It can take one to two years for a new hire to reach the productivity of an existing employee. Businesses lose productivity to the time employees spend training, mastering new systems, and learning to work effectively alongside their team members.

Other members of the team, after seeing the departure of a co-worker, can lose morale, which affects productivity too. During the hiring process, not having someone in the position can mean missed deadlines and increased workloads on other employees.

So What Is the Real Cost of Losing an Employee?

cost of employee turnover Infographic

To know the true cost of replacing an employee, it’s important to look at more than just the cost of finding a new hire to join your team.

There are obvious costs, like posting the new position or using a recruiter, time spent interviewing, and time spent training.

An affiliate for the Society of Human Resource Management calculated that it cost six to nine months’ worth of an employee’s salary to replace them. For an employee making $60,000 a year, that’s $45,000 to hire and train their replacement.

But there are less obvious costs, too, like how it can affect others within your company, its impact on your organization’s reputation, and the reduced productivity you’ll encounter while bringing a new hire up to speed.

How To Calculate Employee Turnover Rates

Numbers differ for different industries, so if you’re curious about how to calculate your own rates and costs, there’s a simple formula you can use.

To determine your employee turnover calculation, divide the number of employees you lose in a month by your average number of employees.

Multiply the answer by 100. A good goal for your turnover rate should be about 10%. Obviously, some turnover is expected because of poor performance or reductions in force, but beyond 10%, start evaluating what else is going on that’s causing your workers to leave.

Why Do Employees Quit?

Employees might quit for many reasons, many of which may be outside your control as an employer. Quit rates following the pandemic reached an all-time high, earning the phenomenon its own name: “The Great Resignation.” The reasons are myriad, but many have to do with satisfaction and culture. Employees leave when they don’t feel valued by their employer, both monetarily and otherwise. Here are some of the top reasons organizations lose their talent:

  • Negative company culture.
  • Few opportunities to offer feedback.
  • Below-average benefits or compensation.
  • Poor work relationships.
  • A lack of business goals or direction.
  • Too few career development opportunities.
  • A low incentive for employee engagement.

Employee Retention Strategies

There are steps you can take to help keep employees and reduce turnover rates:

  • Implement a health benefits program.
  • Offer an array of perks and benefits.
  • Benchmark your employee retention rates.
  • Use proven retention strategies, not guesswork.
  • Don’t assume your employees are happy.
  • Conduct exit interviews.
  • Offer competitive pay and benefits to your employees.
  • Improve company culture at your organization.
  • Commit to employee development.
  • Listen to your employees.

Getting to work on your company culture can help you retain employees and reduce the cost of employee turnover. The benefits of this are numerous. You can build your reputation as an organization people are excited to work for, boost the productivity of your teams, and spend less time developing and training new additions. When you realize the true cost of employee turnover, the argument that you can’t afford some of these retention strategies becomes moot.

Building a better workplace for your teams creates only positive benefits and savings for your organization. If you’re ready to re-imagine how your workplace can better support employees, request a demo. With Workhuman solutions, reducing turnover and creating a thriving culture becomes simpler than ever.


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