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The REAL Cost of Employee Turnover.

The REAL Cost of Employee Turnover.

Business is becoming more and more competitive by the day.

Technology disruptions, increasing client exceptions and, at times, a troublesome economic climate makes building and growing business not for the faint-hearted.

In this climate, the most successful businesses have realized, more than ever, that attracting, holding and developing talent are some of the most vital tasks.

This is significantly the case for smaller businesses that often compete with larger competitors, a scenario where awesome employees can be the critical point of difference.

But as we all know, businesses will invest heavily in hiring and coaching new staff, only to find that, at the same time, some high performing employees are leaving the business to hunt employment elsewhere. This is a situation where it can be an expensive and frustrating leaky bucket.

It's fairly accepted by business owners that employee turnover is costly in both time and money, but the scale of the impact will most likely shock you.


Heaps of analysis has been done in recent years on the REAL financial cost to businesses of employee turnover.

Whilst the financial cost of employee turnover differs based on the seniority and wage bracket, research by SHRM is arguably one of the best indicators.

Their analysis indicates that the ratio of employee turnover equates to about 6-9 months in earnings.

For instance, for an employee on $60,000 pa, the cost to the business of that employee leaving may add up to $30,000 plus!


When people hear the cost of turnover is 6-9 months earnings they usually assume the figure is massively overinflated.

But the analysis includes obvious costs like hiring and training as well as a range of less obvious but still costly implications.

1. On-boarding.

The real cost of training and onboarding a new hire is large and may take several months of additional on shift costs similarly as management time to teach and conduct feedback sessions.

In most cases, simply the training cost will equate to 10-20% of earnings.

2. Reduced Productivity.

Depending on the complexity of the role, new hires can take anywhere from 3 months to 2 years to reach the level of productivity and skill of existing personnel.

3. Engagement.

Turnover, significantly if it is happening often, will have disastrous implications for the broader level of employee engagement.

This ripple effect will have overall productivity implications across the business that may take a lot of effort to settle down.

4. Errors.

There's No new employee who is going to learn the job without making mistakes.

Sometimes these mistakes can have a bit of impact however others might have customer service or profit implications which that the business has to absorb.

5. Cultural Impacts.

Organizational culture is formed from the sum of its people.

Each time an employee leaves and a replacement starts, management needs to spend time to refocus the right values into the culture which may suck up considerable time and energy.

So there you have it, employee turnover can cost your business.

Whilst zero turnover is maybe an unrealistic goal, it's a great idea to constantly measure employee turnover and, if it is reaching dangerous levels, take action.


Simon Ingleson

Founder & CEO


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