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 a business a challenge. 

In this climate, the most successful businesses have realised, more than ever, that attracting, retaining top talent is critical. 

For smaller businesses that often compete with larger competitors, excellent 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 high performing employees are leaving the company to find opportunities elsewhere. 

Business owners somewhat accept that employee turnover is costly in both time and money, but the scale of the impact will most likely shock you.

The Financial Cost of Employee Turnover

Year after year, businesses complete analysis of the financial impacts 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 can be $30,000 plus!

Why is the cost of turnover so high?

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

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

These costly implications include: 

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 role’s complexity, new hires can take anywhere from 6-12 months to reach existing personnel's productivity and skill.

3. Engagement

Turnover that happens often will have severe implications for the broader level of employee engagement.

The ripple effect will affect productivity across the business that may take a lot of effort to settle down.

4. Errors

New employees that are learning the job are likely going to make mistakes. 

Sometimes these mistakes can have an impact which the business has to absorb, including profit and customer service. 

5. Cultural Impacts

Organisational culture comes from the sum of its people.

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


Whilst employee turnover has its effects, if the right leadership is in place, they’ll handle the implications, and an immediate action plan will make things right. 

Pro tip: Measuring employee turnover and its effects on your business will help to understand what can change to lead to higher employee retention, saving you money.

To stay on budget and manage your team more efficiently, consider RosterElf as your online employee scheduling software. Try today for free.