It is estimated that the cost of employee turnover can range from 40-400% of an employee’s annual salary. The total cost of turnover includes money, time and other hidden or “soft” costs, which when combined, are often much more substantial than expected. This post details the various components of the true cost of turnover, along with suggestions for keeping this large, elusive cost under control.

“Hard” Costs of Turnover

- Administration costs for leavers: exit interviews, payroll changes, etc.
- Covering a vacancy with temp-workers or overtime.
- Recruitment and selection costs: advertising the vacancy, reviewing applications, conducting interviews, etc.
- On-boarding new hires: induction, training, etc.
- Severance pay.


"Be cautious when you consider terminating an employee. If you aren't, you could be writing and indefinite blank check and cashing it can be exponentially costly." - Joey V. Price, CEO of Jumpstart:HR



“Soft” Costs of Turnover

- Lost expertise.
- Missed deadlines and disruptions to workflow.
- Increased absenteeism due to stress.
- Decreased productivity or customer service.
- Reduced morale, which may cause remaining employees to express a desire to leave the organization.


The Cost of Turnover Often Goes Unrecognized

Unfortunately, many companies do not recognize the cost of turnover as a major problem. One survey found that less than half of organizations have a process in place to properly calculate turnover costs. Another issue is that the cost of turnover is often underestimated and deemed to be an “unavoidable” cost of doing business.

It is true that some degree of turnover is inevitable, and may even be advantageous: the goal should be to retain top talent while replacing low performers. Managers who are conscious of the rate and cost of turnover in their organizations are better positioned to control these costs.



Take Control of Turnover Costs in Your Organization

With 84% of employees planning to search for a new job in 2012, it is crucial that employers understand what causes employee turnover and how to lessen the blow.

A Harvard University study found that 80% of employee turnover stems from mistakes made during the hiring process. It’s all about prevention: don’t wait until your organization has a turnover crisis. Having an intelligent and informed hiring strategy is one of the best ways to prevent excessive turnover costs and avoid the Vicious Circle of Turnover.



Jumpstart:HR can help your organization find the right people for the right jobs and help them want to stay. We offer a variety of Recruitment Solutions to ensure that you hire people with the right skills and fit for your organization. We also offer Managed HR Services plans that identify the cost of turnover for your organization and pinpoint strategies to lower turnover and turnover related costs. Contact us today to get started! 




About The Author

Adriana Costello is a Virtual HR & Social Media Intern for Jumpstart:HR. She is a student in the MSc Management and Human Resources program at the London School of Economics. Adriana has a BA in Psychology and a BSBA in Business Administration from Boston University. Follow Adriana on Twitter @AdrianaTereza.