How Much Does Employee Turnover Cost?

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Sometimes, our best people have to leave us. It’s frustrating, but, in many cases, inevitable. Even the most positive and supportive work environments are affected by resignations, and unfortunately, every resignation has a financial impact on the company. That’s why, today, we’re sharing a breakdown of the key employee turnover costs, a handy calculator for working out exactly how much all those resignations are costing your business, and some tips for bringing those costs down

How Much Does Employee Turnover Cost?

The exact cost of employee turnover varies from person to person and from company to company, but, by drawing on research, we can make some solid predictions.

The cost of replacing each employee could be anywhere between 50% and 250% of their annual salary (1) with entry-level employees representing the lower end of the range and senior leadership representing the higher. 

We’ve created a handy calculator to help you work out these costs in greater detail, and we’ll also run through a couple of examples:

  • An employee in senior leadership earning $130,000 annually costs around $325,000 to replace
  • An entry-level employee earning $30,000 annually costs around $15,000 to replace
  • If the average salary in your company is $45,000, and you’re fielding four resignations a month, replacing employees is costing around $270,000 a month

Employee Turnover Costs: A Breakdown

The cost of replacing an employee goes beyond hiring. All and any costs associated with the transition period have to be considered. Let’s break them down. 

  • The cost of hiring a new employee - advertising, recruitment, referral bonuses, time spent on the interview process, etc.
  • The cost of onboarding and training - the cost of external training, time spent on internal training, etc.
  • The cost of decreased productivity - research suggests that it takes a new hire between 12 and 28 weeks to reach the productivity of a previous employee (2)
Frankli helps teams avoid and address the key predictors of high employee turnover.

How Can I Reduce the Cost of Employee Turnover?

The best way of reducing employee turnover costs is to stop people from leaving in the first place. And to do that, you need to understand the most common predictors of employee turnover. 

Many leaders expect compensation to play a huge part in their people’s decision to leave. And sometimes it does, but in a recent study by MIT Sloan, compensation ranked 16th on the list of topics that predicted employee turnover (3). The top five were; 

1. Toxic corporate culture

2. Job insecurity and reorganisation

3. High levels of innovation

4. Failure to recognise employee performance

5. Poor response to Covid-19

In combatting these predictors, tools like Frankli can be game-changing. Frankli helps leaders tackle some of the key contributors to high employee turnover, giving people purpose through strategic goal-setting, strengthening manager-employee relationships through better 1:1 meetings, giving people a voice through intuitive feedback, idea-sharing and survey channels, and offering enhanced career development through coaching and mentoring programs. All of these simple rituals combine to drive culture forward and boost engagement. 

Of course, you can look to reduce employee turnover costs by shopping around for a new recruitment agency or making your onboarding process more efficient. But the impact here is tiny compared to the huge savings that could be made by tackling attrition head-on.

Frankli helps leaders reduce employee turnover by creating wonderful experiences for their people. Learn more

1. SHRM, Essential Elements of Employee Retention. 2. Oxford Economics and Unum, The Cost of Brain Drain. 3. MIT Sloan, Toxic Culture Is Driving the Great Resignation.

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