What is the cost of turnover?
The cost of turnover in a company can be substantial, hitting both direct and indirect expenses. It varies by industry, role, and company size, but here’s a breakdown based on widely accepted research and data.
Direct Costs
Recruitment: Advertising a job, hiring recruiters, or paying for platforms like LinkedIn can range from $500 to $5,000 per position, depending on the role’s level. For specialized or executive hires, this can climb to $20,000+ with headhunter fees (often 20-30% of the first-year salary).
Onboarding and Training: New hires need time to ramp up—typically 1-3 months for entry-level roles, 6+ months for senior ones. Costs include trainer time, materials, and software licenses. Estimates peg this at 10-20% of the employee’s annual salary (SHRM, 2023).
Severance: If the departure isn’t voluntary, severance might apply—often 1-2 weeks’ pay per year of service, though this varies by country and contract.
Indirect Costs
Lost Productivity: A vacant role means stalled projects or overburdened teams. The Center for American Progress estimates productivity loss at 20-50% of the employee’s salary during the gap (typically 1-3 months to refill a position).
Knowledge Loss: Departing employees take expertise with them—client relationships, process know-how, or institutional memory. Hard to quantify, but critical in roles like sales or engineering.
Morale Dip: Turnover can tank team morale, especially if it’s frequent or high-profile. Remaining staff might disengage or jump ship too, compounding costs. Studies (Gallup, 2022) link this to a 15-25% productivity drop in affected teams.
Total Cost Estimates
The rule of thumb is that replacing an employee costs 50-200% of their annual salary, depending on the role:
Entry-Level (e.g., $40,000/year): $20,000-$80,000. Think retail or admin—lower training investment but high volume can add up.
Mid-Level (e.g., $80,000/year): $40,000-$160,000. Managers or skilled pros take longer to replace and onboard.
Senior/Executive (e.g., $150,000/year): $75,000-$300,000+. High stakes, longer searches, and bigger ripple effects.
For example, a company losing 10 mid-level employees at $80,000 each could face $400,000-$1.6 million in turnover costs annually. That’s before factoring in intangibles like reputation damage or client loss.
Industry Variations
Tech: Higher end (100-200% of salary) due to talent scarcity and long ramp-up times for coders or engineers.
Hospitality: Lower end (50-75%) but frequent—turnover rates hit 70%+ yearly, per the Bureau of Labor Statistics (2023).
Healthcare: Mid-to-high (75-150%)—nurses or doctors leaving can disrupt patient care and require costly temp staff.
Broader Impact
High turnover signals deeper issues—poor culture, low morale, or uncompetitive pay. A 2023 Deloitte study found companies with turnover above 20% annually spend 12% more on hiring and training than peers, eroding profits. Conversely, firms with strong retention (below 10%) see 22% higher revenue per employee (Gallup).
It’s a silent budget killer—many execs don’t track it until it’s a crisis. What’s the turnover like where you work? Any specific roles you’re seeing leave more?