It is estimated that the cost of replacing a mid-level employee is as much as 150% of that person’s annual compensation package. Comprehensive lists and calculators abound to help Human Resources Managers estimate the annual and per-occurrence costs of employee turnover. Spending $75,000 just to replace one employee is a lot by itself, but when that number is multiplied by the average number of people within an organization, it becomes clear that even small businesses spend too much on employee turnover.

Why is the cost of employee turnover so high? Turnover cost calculators include a long list of related items, all of which cost the organization time and money. This is a key statement- much of the cost of employee turnover is in time. But every minute spent on employee turnover costs the organization money.

Time and money are spent conducting exit interviews, filling out paperwork, mailing COBRA information, and in seeking replacements. Added strain and prolonged work hours are often put on remaining coworkers to complete their own tasks as well as help fill the gap left by a lost employee. Work time is lost to employees’ need to talk to each other about the situation under which the employee left. The organization risks losing clients when a good employee leaves, costing the organization money in the form of projected income. Then there is the cash layout involved in seeking and training replacement employees.

Many of the costs of employee turnover are indirect, but the key to minimizing employee turnover, and thereby saving the organization quite a lot of money, is very direct. Employee retention is the key to reducing employee turnover. That might sound obvious, but employee retention is a difficult task.

Employees most commonly leave because they feel endangered or undervalued. Office politics often play a role in an employee’s decision to find work elsewhere. A sense that the organization is not as invested in the individual as the individual is expected to be in the organization is also a leading factor. Employers must be on the lookout for these conflicts, and implement employee retention best practices if they want to retain quality employees.

Everybody wants a competitive compensation package, and most workers expect annual salary raises. Workers also become disgruntled when they feel that their compensation packages are being slowly reduced in the form of fewer vacation or sick leave days, as well as in the form of annual insurance cost increases. Respect and quality communication between Managers and employees is also key. Investing in employees by providing team-building events such as annual company picnics and regular and accessible training opportunities not only makes for a better work environment with higher quality and quantity output, it makes employees feel that the organization is invested in them. Employees who feel invested in by their employers become likewise invested in the well-being and future of the organization; and invested employees are less likely to leave.