Replacing a single employee can cost a company upwards of 30 percent of that employee’s annual salary, depending on the position type and skill level. The more skilled the position, the more expensive it is to find a replacement.
The chart below outlines the cost of replacing employees in different positions:
|Position Type||Average Replacement Cost|
|Entry-level/non-skilled .||30-50% of employee’s annual salary|
|Service/production||40-70% of employee’s annual salary|
|Clerical/administrative||50-80% of employee’s annual salary|
|Skilled hourly||75-100% of employee’s annual salary|
|Professional||75-125% of employee’s annual salary|
|Technical||100-150% of employee’s annual salary|
|Supervisor||100-150% of employee’s annual salary|
*Cost is shown as a percentage of employee’s annual salary
The costs associated with employee turnover can be broken down into three main categories: separation costs, replacement costs and productivity costs.
The immediate costs incurred when an employee leaves, known as separation costs, include severance pay, unemployment insurance claims and continued benefits, as well as the time your HR staff spends conducting exit interviews and closing out the employee’s payroll and benefits.
Replacement costs include any expenses incurred trying to fill the now vacant position. Think about all the time and money it takes to identify, interview, hire and train a candidate. And that’s just one person. Who knows how many people you’ll need to interview before you find the right one?
Productivity costs may be the hardest costs to quantify, and include not only the time your other staff spend picking up the slack, but also the valuable expertise and potential revenue the departing employee is taking with them. And no matter how wonderful the replacement employee is, it will still take them weeks, if not months, to reach the level of productivity of their predecessor.