The Average Cost of Employee Turnover


An employee leaving the company does more than create a vacancy. It creates a vacuum effect from which time and money is lost until a new employee can be searched for, recruited, hired, trained and started. The average cost for employee turnover depends on the position filled and the salary paid for it, but typically ranges between 1 and 1.5 times the position's annual pay.

Additional Considerations

Replacing the employee with a new worker is an obvious element of employee turnover; however, there are other, less noticeable costs as well. Many companies conduct exit interviews when employees leave their job and the cost to have human resource workers conduct the interviews must be factored into the overall cost analysis. In addition, there are documents, separation notices and insurance issues that must be wrapped up when an employee leaves. These time-consuming tasks use manpower to complete and must be included in the total cost of employee turnover.

Unemployment Compensation

Unemployment insurance premiums are calculated, in part, by your employee turnover rate. Employees who are released from their positions without good reason are typically eligible to collect unemployment insurance benefits. Having a high number of former employees qualify for unemployment benefits can cause your premiums to be raised by the state.

Interim Costs

Covering the missing employee's job duties can become costly. There is a wide range of variables in this part of the equation. If the employee gives sufficient notice, you incur the cost of paying double salaries while the exiting employee trains his replacement. If there is no notice given or you terminate the employee, you may incur overtime pay obligations when remaining employees double up on hours to complete not only their duties but also the duties of the former employee. If your company policy is to pay out accrued vacation or sick pay when an employee leaves, you will incur those costs while at the same time paying overtime for remaining employees to complete double duty.

Replacement Costs

Replacing employees takes time and money. You must search for applicants, then wade through the resumes, applications, phone messages pertaining to the job until you find several to interview. The interview process must be worked around the work day and can take several weeks to complete. The selected new employee may have to give notice at her current position, which means you incur several additional weeks of paying overtime for current employees to complete the former employee's job while waiting for the new-hire to arrive. Once the replacement employee starts, you will need to have her trained, either on the job by other employees or in a training setting, and both scenarios cost money. Productivity will be slower while the new employee learns the job and becomes proficient.

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