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Employee Turnover: It’s Costing You More Than You Think

What is employee turnover really costing your business?

compensation

High employee turnover is not only disruptive, but can also be a significant drain on a business’ bottom line.

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:

Turnover Cost as Percentage of Annual Salary

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

Categorizing the costs of employee turnover

The costs associated with employee turnover can be broken down into three main categories:  separation costs, replacement costs and productivity costs.

Separation 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

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

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.

Want to learn more about employee turnover?

Employee Turnover Guide

2 responses to “Employee Turnover: It’s Costing You More Than You Think”

  1. […] When a bad hiring decision is made, the loss is significant for both the individual hired and the employer. The time and effort involved in recruiting, training and replacing can range from 30% to as much as 150% of the employee’s annual salary, depending on the  position. […]

  2. […] from G&A Partners, the average replacement cost of an entry-level employee is anywhere from 30 to 50 percent of the employee’s annual salary. That figure jumps to 100 to150 percent when you’re replacing a […]

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