Reduce Employee Turnover

The cost of excessive employee turnover is extremely high. Below are some rough estimates that we use in assessing the cost of turning over one employee:

Annual Salary or Wages Turnover Cost
$20,000/$10/hour $7,000
$30,000/$15/hour $10,500
$40,000/$20/hour $14,000
$50,000/$25/hour $17,000
$60,000/$30/hour $20,000

Suppose a business has 50 employees. And assume that employee turnover is running in the 20% range annually. This means that one of every five employees is turning over annually for a total of ten employees. And let’s use $30,000 as the average annual salary/wage. In this example, the company will incur $105,000 of costs associated with employee turnover.

What happens if the turnover is reduced from 20% to 10% annually? In this example, there is a $52,500 savings that will drop straight through to the bottom line. This is a significant amount of money that can be used in productive ways to grow and enhance the business.

Turnover costs include, but are not limited to; hiring expenses, training expenses, productivity losses and internal resources applied to dealing with the termination and hiring process. There are also soft costs associated with excessive employee turnover. Soft costs have more to do with the impact of a revolving door on other employees. Other employees often have to pick up the additional work load until a new employee is hired and trained. This can lead to morale problems.

Keep in mind that we are talking about excessive turnover. There can be times when some turnover is positive. Cleansing the organization of problem employees is usually a positive and can have a significant positive impact on morale and productivity.