The High Cost of Employee Turnover

Employee turnover is something that many businesses wish to minimize as it helps to keep a cohesive, experienced team with the company. A constantly revolving door means many hours are dedicated away from typical necessary tasks, requiring time to interview candidates, retrain new employees, and help pick up extra work as new roles are being learned. What many do not seem to realize, however, is how much money employee turnover is actually costing the company.

Various studies and observations have attempted to quantify the true cost of employee turnover. One case study from Maia Josebachvili, VP of People at Greenhouse, found that keeping one salesperson for three years instead of two, plus ensuring better management and onboarding, produced “a difference of $1.3 million in net value to the company over a three year period.” Josh Bersin of Deloitte estimates that the cost of losing an employee ranges from tens of thousands of dollars to roughly 1.5 – 2.0x that employee’s annual salary. In a more comprehensive study from the Center for American Progress consisting of 11 different research papers over 15 years, “the average economic cost to a company of turning over a highly-skilled job is 213% of the cost of one year’s compensation for that role.”

It is no question that losing an employee can be quite costly, and your business needs to plan accordingly. As you prepare your 2019 budget, be sure to account for potential employee turnover. The costs will be unique to each company depending on the type of business, the specific positions in question, as well as how much turnover you regularly experience. Thankfully, there is an equation you can use to help calculate this cost, but you will need to know the following metrics:

  • Hiring costs
  • Onboarding and training costs
  • Learning and development costs
  • The cost of time with an unfilled role

You will also need to know the number of employees with your company and your annual turnover percentage. Once you have each, plug them into the following equation:

(Hiring + Onboarding + Development + Unfilled Time)

x (Number of employees x Annual Turnover Percentage)


= Annual Cost of Turnover

Understanding your usual employee turnover rates is essential in helping you solve issues within the company that may be causing great talent to leave. You won’t be able to solve turnover 100% as there will inevitably be those who leave for personal reasons, but every effort should be made to resolve issues that are under your control.

The ultimate goal is to prevent as many great people from leaving as possible, which is achievable by utilizing stay interviews. You will gain a better understanding of how the company and leadership are functioning in real-time with honest and unbiased results. Again, keeping the team intact for as long as possible brings the necessary experience to your company while saving valuable time and money.

It is also helpful to utilize exit interviews or surveys, such as our ExitRight® Employee Exit Interviews, in order to better understand the reasoning behind turnover, allowing you to get to the root of the issue. The information received from these interviews enables employers to actively create programs that help prevent future turnover. Of course, these surveys are great as preventative measures, facilitating continuous monitoring of the company culture.

For more information about employee stay interviews, our ExitRight® Employee Exit Interviews, or to schedule a demo, contact us today.