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How Much Can Employee Turnover Cost Your Company?

The cost of replacing employees isn’t just financial. Many companies fail to recognise that finding, retraining and onboarding new employees doesn’t just take up the time of HR professionals, but that of other employees as well. More importantly, having a high turnover rate also affects company culture and morale, both of which are detrimental to the future of a company.


While the cost of losing staff is often one of the largest avoidable costs in an organisation, many do very little to actually avoid that cost by improving their company practices. In this article, we will outline how much it costs to replace an employee and what you can do to reduce staff turnover.

How Much Does it Cost to Replace an Employee?


Unfortunately, with so many hidden and untracked costs involved, it’s difficult to pinpoint an exact figure for how much employee turnover costs in a financial sense.

According to the Society for Human Resource Management (SHRM), it’s estimated that for every salaried employee you replace, it costs an average of six to nine months of their salary [1] to find and onboard a new employee. However, this can also vary depending on employee seniority and role. Croner estimates that while it costs an average of $15,000 to replace an employee, it can cost anywhere from $50,000 to $130,000 if that employee is a senior staff member [2].

Why is the Cost of Losing an Employee so High?


When you have to replace an employee, whether that’s through an employee leaving or termination, there is a wide range of costs involved.

- Hiring costs are often the largest expense. If you use a recruitment agency, they’ll typically charge 10-20% of the job’s annual salary if you hire a candidate they put forward.

- Interviews also come at a cost. According to Oxford Economics, each interview costs an estimated $1,300, which covers the salary costs of all employees involved in the interview process.

- Onboarding takes an average of four hours, but in the cases of senior staff, can require a full working day. This means that you’ll be paying at least two employees to perform duties outside of their job role.

- Training, whether done in-house or externally, comes at a cost - Bersin estimates that the average company spends $1,400 per employee [3] on training costs.

How to Reduce the Cost of Employee Turnover


The simplest way to reduce employee turnover cost is to address why employees are leaving your company. Whether it’s because you’re not hiring the right people for your vacancies, or your company isn’t taking care of its people, you must address employee morale as the first step in reducing turnover costs.

In another study from SHRM [4], it was found that companies that used a pre-boarding program were 11% more likely to retain employees after their first year of employment. It’s for this reason that many companies are beginning to implement pre-boarding programs to engage employees from the moment they accept a job offer.

SHRM also found that 90% of employees decide whether to remain with a company within the first six months of their employment. Tools like 90-day reviews, work anniversary recognitions, and other benefits are extremely valuable in helping new employees decide to stay in those crucial six months.

Another study found that nearly half of employees have left jobs because of bad management [5], In this study, 41% of the employees who left because of a bad boss did so because they weren’t recognised for their work. Many experts have testified that UK managers typically don’t receive training in how to manage their employees, so your company must implement a program that ensures that every manager is trained before they are given responsibility for other employees.

According to OWL Labs, companies that offer remote working opportunities have a 25% lower turnover rate [6]. With newer generations of employees demanding more flexibility in their working hours, offering remote working is a great way to show employees you value their time. Remote workers tend to report that they’re happier than on-site employees [7], which shows that giving employees the flexibility to avoid commutes and work on their own schedule improves employee morale and ultimately employee retention.

Whether your employees are working on site or remotely, there is a tremendous amount of independent research that proves that investing in good onboarding and continued engagement of employees has a positive impact on the success of a company. This can be measured in employee retention, employee satisfaction with the culture and even in the company’s revenue, so it pays off to get this right!

Looking for an onboarding and engagement solution to reduce the cost of losing employees? Qualee can help you to improve your retention rates. Try the FREE Starter Plan today!


[1] https://www.accountsandlegal.co.uk/small-business-advice/average-employee-cost-smes-12-000-to-replace

[2] https://croner.co.uk/resources/culture-performance/cost-of-staff-turnover/

[3] https://www.prnewswire.co.uk/news-releases/bersin-by-deloitte-uk-learning-and-development-organisations-spend-less-on-external-training-providers-even-as-budgets-rebound-300211414.html

[4] https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/onboarding-key-retaining-engaging-talent.aspx

[5] https://www.forbes.com/sites/karenhigginbottom/2015/09/08/bad-bosses-at-the-heart-of-employee-turnover/#78a1dec84e63

[6] https://www.owllabs.com/state-of-remote-work

[7] https://www.owllabs.com/state-of-remote-work/2019

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