The Real Cost of Employee Turnover

Profitability, Productivity, and Morale…Oh my.

When it comes to employee turnover, many business owners tend to focus on the dollar amounts related to employee separation.  However, when it comes to the true expense of losing valuable employees, some costs are not as visible.  These hidden costs will ultimately have an effect on the bottom line.  It’s been estimated that losing an employee can cost a company 1.5-2 times the employee’s salary, and this estimate fluctuates with positions of seniority. 

 Employee turnover can cost a business its profits, productivity, and employee morale. Employee retention is just as important as finding great talent.   Business owners can use an employee turnover cost calculator to determine how much revenue is lost to preventable turnover issues, and maximize efforts to retain valuable employees.

 Calculating the Cost of Employee Turnover

 Profitability

Advertising open positions, performing background checks, and onboarding are just a few hiring expenses that may be required for recruitment purposes.  These expenses are wasted when employers don’t take care regarding high turnover rates.  Training new hires is another expense that cuts into profits when team members need to constantly be replaced.

 Productivity

When employees leave a company, the work to be done remains.  Until the vacant position is filled, the remaining tasks must be completed by colleagues or management until a new hire is acquired.  This employment gap can lead to stalled projects. Additional expenses can result from lost productivity or a lost customer base when client-facing employees leave an organization.

 Employee Morale

Losing valuable employees who have built relationships in the organization can be a significant loss to employee morale.  High turnover rates are also unattractive to new talent.  If potential employees or new hires notice the turnover rate for an organization is high, they won’t be motivated to work to their full potential or stick around, which can cost businesses on the backend.

 The true cost of employee turnover will always include intangible costs alongside monetary expenses. Hire the right people and consider some employee benefits and perks to assist with employee retention. Focus on successful retention strategies to help reduce your cost of employee turnover.

At Strategic HR Advisory, we believe your employees are your business.  Protect your growing business with a certified HR expert by your side.  Contact us today!