Things to Know About the Cost of Employee Turnover

Most business owners keep track of their spends on advertising, hardware, infrastructure, maintenance, etc., but there’s something most of the individuals miss to carry a precise calculation on the employee turnover cost. As a result, the cost goes way up than the predictions of the business owner and team.

A Bureau of Labor Statistics report states that approximately 3-4% of employees leave their current employment every month. Starting from publishing job vacancies to interviews, referral bonuses to extra workload of vacant position on present employees and training – all these costs add up more to the expenses of an organization. This post is a quick look at the factors that raise the cost of employee turnover.


The reasons for employee turnover is expensive

Whenever an employee leaves an organization, the business owner has to incur direct exit costs and bear additional costs in the process of recruiting and training a new employee. Payouts for sick leaves, vacations, healthcare coverage, taxes, etc., – all are forms of direct exit costs.

In addition, whenever an employee leaves an organization, there is a decrease in productivity, loss of knowledge, and an indirect effect on the morals of the employee’s colleagues. All this together adds up more to the turnover costs.

Mentioned below are some of the major factors that directly contribute to overall employee turnover cost:

  • Costs incurred while recruiting

An organization, when carrying out the recruiting process, ends up paying for various processes. Job listings, paying recruiting agencies, sponsored events, and advertisements may sound like all, but factors like assessing the candidates, background checks, travel expenses for verification, etc., add up more the costs.

In addition, many organizations offer relocation packages while others offer signing bonuses. In this phase, many candidates put a denial to the position offered for various reasons. All this together impacts the turnover cost.

  • Downfall of productivity

The employee when leaves an organization, leaves behind their colleagues with the extra workload. However, it doesn’t mean that all of the work will be done when an organization is short-staffed, thus, resulting in decreased productivity.

On the other hand, it might discourage or demoralize the other employees to work beyond what they are assigned. As a result, the other employees’ productivity falls too and gives rise to employee dissatisfaction, which can put more resignations on the table if it gets intense. Such situations often happen when the employee who leaves the organization has been on a senior post or had a good influence over others.

  • Costs incurred while training and onboarding

It’s not just the recruitment process that impacts the employee turnover cost, but the training and onboarding process too. Such a process takes several months to train and align the new candidate with the productivity level of the previous employee.

Besides, new candidates might seek help from their colleagues. While assisting new candidates, employees will not be able to perform their own work, which again lowers productivity to some extent.


In addition to the factors mentioned above, an organization also loses institutional knowledge depending upon the seniority and experience of the employee who exits. Therefore, it becomes immensely important for any business owner or an organization to understand and calculate their actual employee turnover cost.

Employee retention plays an inevitable role in lowering such costs. Therefore, reaching out to professionals who can help recruit and retain employees with minimal costs is always a good move.

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