How to calculate staff turnover cost in Australia
A practical, step-by-step guide to calculating the true cost of staff turnover in Australian businesses. Learn how to quantify separation costs, recruitment expenses, training investments, productivity loss, and backfill costs to understand the real financial impact of employee turnover.
Written by
Steve Harris
General information only – not legal advice
This guide provides general information about calculating staff turnover costs in Australian businesses. For specific financial or accounting advice, consult a qualified professional. It does not constitute legal, HR, or professional advice and should not be relied on as a substitute for advice specific to your business, workforce, or circumstances.
Staff turnover is one of those costs most Australian businesses feel but rarely measure accurately. You notice the disruption, the overtime, the constant training, and the pressure on remaining staff — yet when it comes time to justify investment in retention or operational changes, the numbers are often vague or underestimated.
This guide breaks down how to calculate staff turnover cost in Australia, step by step, using realistic assumptions that reflect Australian employment conditions, awards, and compliance obligations. The aim is to give you a clear, defensible way to quantify the real cost of replacing an employee.
What is staff turnover cost?
Staff turnover cost is the total financial impact of an employee leaving and being replaced. It goes well beyond recruitment ads or agency fees.
In Australia, turnover costs typically include:
- Recruitment and advertising expenses
- Management and HR time spent on hiring
- Onboarding and training costs
- Lost productivity during the ramp-up period
- Overtime or backfill costs to cover vacant shifts
- Compliance and payroll administration
- Increased error risk and burnout in remaining staff
The real cost is higher than you think
When calculated properly, turnover costs often land between 50% and 150% of the employee's annual salary, depending on role complexity and industry.
Why Australian turnover costs are often underestimated
Many overseas benchmarks and generic calculators ignore Australian-specific factors such as:
Award interpretation
Classification checks and correct pay rate verification for new starters
Leave accrual payouts
Annual leave and long service leave paid on termination
Superannuation & payroll tax
Administrative costs for finalising and setting up new employees
Mandatory training
Licensing, certifications, and WHS inductions required by law
Guidance from Fair Work Australia and the ATO makes it clear that employment transitions carry both time and compliance risk — not just direct expenses.
The staff turnover cost formula
At a high level, the calculation looks like this:
Staff Turnover Cost = Separation Costs + Replacement Costs + Training Costs + Productivity Loss + Backfill Costs
The key is to break each category down into measurable components rather than relying on a single percentage estimate. Let's work through each step.
Calculate separation costs
Separation costs are incurred when the employee leaves, regardless of whether you replace them immediately.
Typical Australian separation costs
- Exit interviews and administration
- Final pay calculation and processing
- Accrued leave payouts (annual leave, long service leave where applicable)
- Manager time handling handover and documentation
- Temporary redistribution of duties
Example: Separation costs
An employee earning $65,000 resigns with accrued leave:
Calculate recruitment and replacement costs
This is the most visible part of turnover, but still commonly undercounted.
Recruitment cost categories
- Job ads (Seek, LinkedIn, industry boards)
- Recruitment agency fees (if used — typically 15-20% of salary)
- Screening, shortlisting, and interviews
- Reference checks and pre-employment checks
- Employment contract preparation
Example: Recruitment costs (no agency)
Note: If an agency is used, add 15-20% of salary — this can exceed $10,000 for skilled roles.
Calculate onboarding and training costs
Training costs are often treated as "business as usual", but they are a direct consequence of turnover.
Australian-specific training considerations
- Award classification training
- Workplace health and safety induction
- Systems training (POS, rostering software, payroll)
- Shadow shifts or supervised hours
- Mandatory certifications or licences (RSA, food handling, etc.)
Example: Training costs
Calculate lost productivity
Lost productivity is usually the largest cost, yet the hardest to see on a P&L statement.
New employees rarely operate at full capacity immediately. Depending on role complexity, it can take 3–9 months to reach expected performance levels.
Conservative productivity loss method
- Estimate ramp-up period (e.g., 3 months)
- Estimate average productivity gap during ramp-up (e.g., 30%)
- Apply to salary cost for that period
Example: Productivity loss
Note: This does not include errors, rework, customer dissatisfaction, or lost sales opportunities.
Account for backfill, overtime, and burnout
In many Australian workplaces, vacant shifts are covered by:
- Overtime at penalty rates
- Higher-paid supervisors stepping in
- Casuals unfamiliar with systems or customers
This not only increases direct costs but can lead to burnout and absenteeism in remaining staff — potentially triggering more turnover.
Example: Backfill costs
Total staff turnover cost example
Putting it all together for a $65,000 role:
| Cost Category | Amount |
|---|---|
| Separation costs | $4,950 |
| Recruitment costs | $1,620 |
| Training costs | $3,400 |
| Productivity loss | $4,875 |
| Backfill & overtime | $3,100 |
| Total turnover cost | $17,945 |
For a $65,000 role, that's 27.6% of annual salary — and this is a conservative example without agency fees. Many businesses discover the true cost is far higher once customer impact and repeated turnover are factored in.
Industry benchmarks
For entry-level hospitality or retail roles, expect 50–75% of annual salary. For skilled or supervisory roles, the figure commonly reaches 100–150% when all costs are properly accounted for.
Using a staff turnover cost calculator
A staff turnover cost calculator is simply a structured way of applying the steps above consistently across roles. When building or using one, ensure it includes:
- Role-specific pay rates and penalty rates
- Award and compliance-related admin time
- Training duration by role complexity
- Realistic ramp-up assumptions (not just 2 weeks)
- Overtime and backfill patterns from your actual data
Generic calculators often underestimate Australian conditions by ignoring awards, penalty rates, and compliance requirements.
Common mistakes when calculating employee turnover cost
Using overseas benchmarks
US or UK figures ignore Australian awards, super, and compliance requirements
Excluding management time
Manager salaries are "already paid" but their time has real opportunity cost
Ignoring productivity loss
New staff don't hit full productivity on day one — this is often the largest hidden cost
Treating overtime as normal operating cost
Backfill overtime is a direct consequence of the vacancy, not business as usual
Failing to separate voluntary and involuntary turnover
Different causes require different solutions — track them separately
When turnover cost calculations matter most
Accurate turnover cost figures are particularly useful when:
- Comparing sites, departments, or roles
- Evaluating the impact of chronic understaffing
- Assessing changes to rosters or workloads
- Budgeting for growth or seasonal peaks
- Reviewing workforce risk and compliance exposure
- Justifying investment in retention initiatives or technology
They provide a common language between operations, finance, and HR — turning "we feel like turnover is high" into "turnover cost us $X last quarter."
Shift predictability
Inconsistent or last-minute rosters increase turnover. Roster templates and early publishing help.
Workload balance
Understaffing creates burnout. Labour budgeting helps balance cost with coverage.
Availability management
Respecting staff availability reduces conflicts and improves retention.
Fair shift distribution
Perception of unfair shift allocation drives turnover. Transparent rostering and open shifts help.
Frequently asked questions
- The cost of replacing an employee in Australia commonly ranges from 50% to 150% of their annual salary, depending on role complexity, training requirements, and overtime reliance during the vacancy period.
- Yes. Accrued annual leave and long service leave paid on termination are direct separation costs and should always be included in turnover cost calculations.
- For most roles, new employees take between 3 and 6 months to reach full productivity. Specialised, technical, or supervisory roles can take longer due to additional training and relationship-building requirements.
Reduce turnover with better rostering
RosterElf helps Australian businesses reduce turnover through predictable schedules, fair shift distribution, and staff availability management.
Related guides
More resources for workforce management and HR
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