What does staff turnover cost?

What does staff turnover cost?


Losing a good employee may be more expensive than you realize.  Consider some of these costs before you hesitate to spend money on retention or “culture” items.

Some expenses are very quantifiable:

  • Separation pay
  • Employment ads
  • Temporary workers
  • Background checks

Some expenses are somewhat hidden within your budget:

  • Time spent on exit tasks.
  • Time spent reviewing resumes, scheduling interviews, planning interviews, holding interviews, testing.
  • Time spent onboarding and training.

And then there are the expenses that are less easy to quantify, but extremely important.

Lost productivity while position is vacant.

A missing employee is not be putting in billable hours or providing services that bring in funds. Some things just don’t get done—only to hurt you later. The effect ripples across the department as managers try to find “unbudgeted time” to spend on covering and then recruiting and training.

Loss of institutional memory.

From a BBC analysis after the British Airways IT problems in June: “the airline’s Disaster Recovery Plan should have whirred into action. But that will have depended in part on veteran staff with knowledge of the complex patchwork of systems built up over the years. Many of those people may have left when much of the IT operation was outsourced to India.” Losing your key staff member may not ground flights for days, but can easily cause lost productivity as others try to figure out where documents are filed, how to configure the phone system, or when you need to get a raffle license for your fundraiser.

Some terminations can lead to these expenses:

  • Unemployment insurance rate increases
  • Legal costs

HR professionals who want to bring hard numbers to the table can find an analysis tool prepared by the Society for Human Resources Management (SHRM) here: https://www.shrm.org/resourcesandtools/hr-topics/behavioral-competencies/critical-evaluation/pages/placing-dollar-costs-on-turnover.aspx


  • Retention activities can be cost effective.
  • Sometimes letting an employee go is the right move, but knowing the cost of turnover is important as any company, small or large, makes employment and budget decisions.
  • Making a good hire is worth the time and effort.

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