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The Cost of Turnover

Some turnover of employees is normal and expected. When it becomes excessive, it costs a business a significant amount of money.

There are tangible and intangible costs associated with employee turnover. As a general rule of thumb, we believe that the cost of turning over one employee is roughly 25% of that employee’s annual wages and benefits. For an employee earning $30,000 (includes benefits), this would amount to $7,500 of “cost” associated with that employee leaving the company. For example, suppose a company employing 100 people turns over 25% of its work force annually. In this case 25 employees leave the company every year. Assuming all 25 employees were earning $30,000/year, the total approximate cost of these employees departing is $187,500. If the turnover rate is reduced to 10%, the total approximate cost would fall to $75,000.

Obviously it is important to take steps to control employee turnover. Are you taking those steps?