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Learn 3 Costs Associated with Employee Turnover

Post Author Rob MacLane
Mar 6, 2019 2:15:00 PM
Workforce Insights
3Ci Header - How To Fix Employee Turnover (3)

To thrive in today’s competitive economy, businesses need to find and retain top talent. But what happens when an employee simply isn’t the right fit? Employee turnover is an inevitable and necessary reality that all businesses will someday face, but that doesn’t make its effects any less painful.

We all know that losing an employee can be a costly scenario, but exactly how expensive is it? Here are three costs associated with employee turnover and how to fix it.

1) Lower Bottom Line

According to the Society for Human Resource Management, the average cost-per-hire in the US is $4,129 with an average of 42 days to fill an open position. While there is no standard to measure the cost of losing an employee, there are a few studies out there that make estimates. One used the US median income of $45,000 a year to estimate that the average total cost for turnover in the US is $15,000 per employee. Other studies say that you can expect to lose as much as twice the employee’s annual salary. Ouch!

Really, the cost of turnover comes down to your unique business and the employee’s specific role. Keeping track of costs like hiring, onboarding and training, as well as learning and development, can help you identify a more accurate number. Regardless, losing an employee is expensive and can hurt your bottom line.

2) Lost Company Knowledge

Knowledge is power, and a high turnover rate means you’re losing valuable knowledge on a regular basis. Depending on the person’s role at the company, turnover can leave a significant gap in the overall functionality of the business.  According to HR Daily Advisor, 42% of the skills and expertise required to effectively perform in any given position is only known by the person who currently holds that position.  This reality can prevent your replacement from being effective in their role and can also increase their chances of feeling overwhelmed early on.

3) Poor Team Morale

It’s a fact in the workplace—seeing a team member go either voluntarily or involuntarily can cause your employees to disengage and lose steam. If it was the employee’s decision to leave, turnover can spark thoughts and conversation about why the person left in the first place.  Worst case scenario, it can even inspire other employees to do the same.  If it was involuntary, employees might begin to feel insecure about their positions and lose trust in management. 

In some cases, it’s best for all involved for an employee to move on.  But most of the time, losing an employee comes with significant costs to the business.  Here are a few other hidden costs associated with employee turnover to consider:

  • Hiring a new employee and the costs associated with onboarding and training.
  • A new employee will likely offer a lower quality of service and could lose you customers.
  • A new employee will likely be less productive at first and need some time to get up to speed.

Preventing costly employee turnover starts with hiring the right people.  The right people have more than just the right skills to get the job done.  If you’re looking for a partner to help you find and hire top talent for your tech division, Get in Touch Today!  We’d love to talk to you.


What measurements do you have in place to help you avoid the Halo Effect?  Click below to discover how this phenomenon influences your hiring decisions.

Click to Learn How to Avoid the Halo Effect

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