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How to Calculate the Cost of Employee Turnover

By Leo Ramirez Posted on August 21, 2017

We all know that no matter the industry, your employees are your company's most valuable resource. Since we know this, we realize that high employee turnover is a really bad thing.

Yes, some level of employee turnover is unavoidable. There are instances where employees are not the right fit, change careers, or retire. But even in those instances, attrition is costing you.

While all companies know employee turnover problem, most do not truly realize what it is costing them. Do you?

The fact is, any level of employee turnover comes with a price.

Unless you have already invested the time and energy into calculating the cost of your employee turnover, chances are you are underestimating the figure you are putting on it.

To be clear, we’re not just talking about the less tangible things, such as product expertise and company knowledge. You definitely lose that with employee turnover too. But we are talking about actual, monetary cost. Companies lose a huge amount of money to employee turnover every year.

The Data

Depending on the level of expertise and specialized skills of the position, replacing a single employee could cost you far more than their annual salary.

Entry level employees are the least expensive to replace and you can still expect to pay 30-50% of their annual earnings to find, hire, and train someone to fill their position. For any employee more than entry level, however, you should be prepared to shell out the equivalent of their annual salary for a replacement.

Mid-level employees can cost 150% of their annual salaries to replace. When you get to highly specialized employees or anyone in an executive level position, the cost of replacement can skyrocket to 400% percent of their annual salary.

Brief How-To

Want to know how to figure out what employee turnover is costing you and your company specifically?

For starters, you need to take into account the following:

  • Lost work hours spent completing administrative paperwork and exit interviews.
  • The burden on coworkers, such as any overtime.
  • The full cost of finding, screening, and hiring a new employee. This includes everything from the work hours spent creating the job description all the way through to the cost of pre-job testing or screening and onboarding costs.
  • Any loss of work hours and productivity from the vacant position as well as other employees who will be carrying the load during the vacancy. Supervisors, peers, and subordinates all tend to be less productive during the transition to a new employee.

You can use Google to find a formula that will allow you to plug in all of these specifics.

If you don’t have the specifics and are just approximating to the best of your knowledge, there’s no need to spend time tracking down estimates for a complicated formula.

Instead, you can use our simple 2017 Attrition Calculator to determine what employee turnover is truly costing you this year. You will need your yearly attrition numbers for entry-level, mid-level, and executive level employees as well as the average salary for each tier.

Simply enter those numbers and we’ll do the calculations for you. Ready to give it a try and find out how much money you are losing to employee turnover? Click here to get started.

Author: Leo Ramirez

Leo is the co-founder and CEO of Encast, an organization dedicated to improving the way CSR professions create, manage, and measure CSR programs. Leo is passionate about the role that culture plays in business success. Leo has launched and managed social ventures, lead multi-disciplinary teams, and built solid relationships with civic and corporate leaders. His 25-year career has spanned executive management, business development, consulting, nonprofit management, technical support and engineering positions with Southwest Key Programs, Oracle, Sun Microsystems, Coremetrics, Trilogy and Apple.

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