The True Costs of Employee Turnover

Salaries and compensations are the largest expenses you have in a business. It is a recurring expense every month and is required to run the business. Calculating the cost of turnover and its impact on the bottom line is very important.

How to calculate the cost of employee turnover

The calculation takes into account:
  • the loss of knowledge
  • the productivity lost from other employees filling in for the vacant position
  • the cost to hire replacement
  • the new hire training cost
  • the time to return to previous productivity level

Employee turnover cost calculator (Free)

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What is the cost of employee turnover?

The cost of turnover is the cost associated with turning over one position. It includes direct costs and indirect costs.
Direct costs
  • Recruitment costs (job postings, advertising, agency fees, background checks)
  • Training and onboarding expenses
  • Separation costs (severance pay, unused paid time off)
  • Exit interviews and administrative tasks
  • Temporary staffing or overtime costs to cover the vacant position
  • Costs of conducting interviews and assessments
Indirect costs
  • decreased productivity during the transition period Loss of institutional knowledge and expertise
  • Impact on employee morale and engagement
  • Potential impact on customer relationships
  • Management and HR staff time spent on recruitment and onboarding

Turnover is inevitable for a company. Companies can have a high turnover rate or a low one depending on their retention rate. Turnover may be a part of business, but high turnover is largely indicative of deeper issues.

How to Calculate Employee Turnover Rate?

The calculation is based on the number of employees in the company compared to the number of employees who actually leave. You can compute the numbers to have a monthly or yearly turnover rate.

Formula to calculate turnover rate:

Turnover rate = [(# of employee separations) / (average # of employees)] x 100

Why is it important to reduce employee turnover?

A high employee turnover rate has a lot of consequences in a company. It includes:
  • Lost productivity
  • Lower employee morale
  • Weakened employer reputation
  • Even more turnover
  • Lowered Employee Engagement
  • Stagnation in Innovation
That's why it is important to keep turnover rate as low as possible. It can have a significant impact on an organization's overall performance, culture, and bottom line.

How to reduce employee turnover?

Employee turnover is not a fatality. You can reduce it and control it as long as you have the right method. Here are 6 ways to help reduce employee turnover:
  • Recognize employees.
  • Ask for feedback and act on it.
  • Promote your company values and make them actionable.
  • Share your company mission. Again and again.
  • Improve your benefits package.
  • Conduct exit interviews.

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