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The Costs of High Turnover Rates



The Costs of High Turnover Rates

Employee turnover is expensive. According to a study undertaken by Gallup, it costs 16% to 20% of an employee’s annual wage to replace an hourly worker. To find an appropriate replacement, according to the same study, it takes 42 days, on average.

Think in terms of the costs of recruiting and training (the latter may take between six and eight months for the employee to become fully proficient).

Shortly put, the costs of replacing an employee are usually higher than the costs of investing in the regular employees. Generally speaking, whenever a new employee can bring an added value that will overshadow the turnover costs, it is a good idea to hire them.

The pros of turnover are potential new ideas and the positive attitude the new employee may bring forth. 

This applies, as a rule, to lower position levels. I.e., a clothing store is unlikely to face costly turnover rates when replacing sellers, but things stand differently when it comes to higher-level positions (CEOs, CFOs and CIOs, for example).

Not only are highly skilled professionals difficult to persuade to change positions, but they also need to become fully familiar with your company’s practices and procedures. That’s where the costs of training fit in, and they are substantial.


An Engaged Employee Is a Good Employee

It is a well-known fact that an engaged workforce is the one single factor that drives business success in the long run. If employees are not happy, they will not feel motivated to perform their jobs to the best of their abilities, which inevitably leads to turnovers.

Now, in most cases, employee satisfaction is directly linked to motivation and feedback options, which should be provided by the management at all times. Gallup’s study shows that engaged employees are 17% more productive than their unengaged counterparts. In addition, a happy employee will be respectful of the company, will not look for other job alternatives, will be loyal and will always give their best with the task presenting itself.  In the long run, that means more happy customers, and we all know that customers’ feedback may make or break a business.


Actual Costs of High Turnover Rates

As mentioned above, the costs vary greatly depending on the position. According to SHRM’s Employee Engagement Survey, every time a high position employee is replaced, the business spends six to nine monthly salaries for the position in the process. The figures for executive-level employees are even higher and may reach twice their annual salary, according to a CAP study.

Some stats listed in the study show the following average turnover costs:  

  • 16 percent of annual salary for low-paying positions (under $30,000 annually)
  • 20 percent of annual salary for mid-paying positions (between $30,000 and $50,000 annually)
  • Up to 213 percent of annual salary for highly specialized executive positions


The Costs of High Turnover Rates

However, the costs are not set in stone and are difficult to predict, as they depend on a number of factors unique to each respective business.

According to Josh Bersin of Bersin by Deloitte, the “total cost” of losing an employee includes:

  • Cost of hiring a new employee (advertising, interviewing, screening, hiring)
  • Cost of onboarding (training, management time)
  • Lost productivity (a new employee may take one to two years to reach the productivity level of an existing employee)
  • Lost engagement (other employees who see high turnover disengage and lose productivity)
  • Customer service and errors
  • Training cost
  • Cultural impact
The Costs of High Turnover Rates




How to Reduce Employee Turnover

As ever, salaries and job satisfaction play a crucial role in reducing employee turnover. As already mentioned, engaged employees contribute to company success by their own volition, but keeping people happy may prove a difficult task for some businesses (i.e., online and outsourcing companies). 

A good salary is a good start, but there are also various bonuses to consider. I.e., bonuses may be linked to both the employee’s and the company’s performance. This move will directly inspire the employees to constantly give it their best.  

Offering a competitive benefits package is another way to inspire people. The package may include, i.e., flexible hours, life insurance and disability insurance.

Offering performance feedback is a certain way to keep employees happy in the long run. Not only will it show them that their company recognizes their contributions, but it will also allow them to lodge their complaints (if any).

Note that only truly listening to people’s ideas and complaints will do the trick. Make an effort to recognize good ideas and implement them where applicable.

Providing continual learning and team-building activities is another good approach. Remember that an engaged workforce always looks forward to polishing their skills. Some ideas include presentations, training sessions and mentoring.  


It goes without saying that promotions are a good incentive, so make certain to offer training programs for career progression. Challenging assignments will keep an employee happily engaged, and if their work is recognized and praised, all the better. 

Demonstrating respect is crucial in all life situations, but nowhere is it more important than in the business environment. If you actually listen to employees’ ideas, you also stand good chances of enhancing your own skillset on top of encouraging creativity.

Finally, everyone wants to enjoy their work. After all, we spend too many hours a day doing menial tasks, which is the inevitable result of the digital age we live in. Make the job fun by accommodating employee’s preferences. Encourage positive communication and interaction, where people can joke and laugh over a cup of coffee.

With all these things incorporated, employees will come to work gladly every day, but there is just one variable to factor in. Too much work and overscheduling will inevitably bring employees to a breaking point one day.

To avoid that, assign reasonable tasks so that the employees will have enough time to finish them satisfactorily and also be left with sufficient time for their private life. It is also a good idea to allow flexible starting and ending working hours, as that will reduce the stress greatly. After all, it’s the core hours that really matter.

All in all, the recipe for reducing turnover costs lies in creating a healthy relationship with your employees. This should be a no-brainer, but it may still worth reiterating.



Angela Ash is a professional content writer and editor, with a myriad of experience in all forms of content management, SEO, proofreading, outreach, and social media. She currently works with Flow SEO, a boutique agency founded by Viola Eva, which offers in-depth SEO analysis, custom SEO strategies and implementation.

Barjunaid Cadir is a Content Writer in The Weekly Trends, Web Developer, SEO Content Manager, LinkedIn Specialist, Social Media Manager, and a University Researcher at Anadolu University in Eskisehir, Turkey.