The true cost of employee turnover involves more than just recruiting-related expenses. In fact, when an employee leaves, it can cost from one-half to two times that worker’s annual salary to replace them. That’s because losing a team member includes added costs like:

  • Advertising the position your company now must backfill
  • Onboarding the eventual person who accepts the offer
  • Lost productivity during the time the role remains open

When you consider that voluntary attrition ranges from 12% to a whopping 60% annually, depending on the industry, it’s clear that the cost of employee turnover can quickly get out of hand.

Bureau of Labor Statistics data shows professionals working across sectors and at companies of different sizes are still exiting their organizations — for reasons ranging from a lack of career development to a poor opinion on their company culture to insufficient pay. So, it’s more important than ever for companies to drive down turnover and boost retention.

40% of workers report high employee turnover in their organization and an increase in their workloads due to voluntary attrition. 


Calculating the Cost of Employee Turnover

Before exploring ways you can reduce employee turnover at your company, let’s first examine what goes into the actual cost of replacing an employee for most companies today.

Unfortunately, the real cost of turnover is difficult to measure because most businesses lack the cohesive systems needed to track relevant metrics across various departments like HR, finance, and operations. That said, there are several tangible numbers that you should keep in mind:

  • Hiring costs: Recent research from SHRM shows the average cost of hiring a new, full-time employee is around $4,700. If you offer signing bonuses and relocation packages, be sure to include them in your calculation.
  • Temporary employees and overtime: You may need to allocate additional budget to hiring temporary workers or paying overtime to fill the gap left by departing employees.
  • Training costs: New employees often require specialized training to learn their job. TrainingMag research puts the average cost per learner at $986. But, don’t forget hidden costs, like shipping materials to remote employees.
  • Time to full productivity: This is a pretty simple calculation based on average ramp-up time. If it takes the average new employee three months to fully onboard, the cost is 25% of their annual pay, six months is 50% of annual pay, and so on.


Two colleagues reading pay information together on a laptop


Reasons for Employee Turnover

Conventional wisdom says that employees change jobs to increase their pay. That’s not always the case. While compensation does often play a part in the decision to leave a job, research continues to show that pay is not the most important driver. Other factors — including communication, leadership, workplace environment, and a lack of appreciation for their work — are cited far more often.


Compensation is also an important consideration (54%), followed by benefits (49%) and flexible schedules (33%). An overarching theme of turnover in recent years is also workers’ desire for employee development programs to reskill and upskill and take on new roles.

All of these stats lead to one clear conclusion: employee turnover is largely preventable. In fact, a study by the Work Institute found that more than three-quarters of professionals who left a job voluntarily could have been retained by employers.

The keys to doing so are clear: Provide career opportunities, create a great workplace, and make employees feel valued. You may have to invest some money, but you’ll end up saving in the long run.

How to Reduce Employee Turnover

Depending on the size of your organization, employee turnover may be costing you tens of thousands of dollars each year. Your business would be far better off investing collective time, resources, and energy to make your employees want to be part of your business for years to come.

With that in mind, here are five areas to focus on as you work to limit employee turnover.

1) Employer brand

Your employer brand refers to the way your company is perceived by both prospective customers and job candidates. In terms of your TA efforts, it’s the way you differentiate yourself to potential hires.

It’s important to establish an authentic and consistent employer brand in the marketplace, to ensure that job seekers understand who you are as a company, how you treat your employees, and whether your values align with their own — leading to fewer surprises once they’ve been hired.

2) Onboarding

It’s no secret that a significant percentage of new hires leave within the first year, or even the first six months. If you want employees to stick with your company, you need to set them up for success.

An effective onboarding program will help new employees acclimate to the company, their team, and their responsibilities — ultimately leading to a better experience. You may have to get creative with onboarding in today’s remote environment, but that doesn’t make it any less important.

Just 26% of recruiters indicate their organization is prioritizing improvements to employee retention. 


3) Internal mobility

Giving employees an opportunity to grow within your company is a win-win. For employers, it turns your workforce into a robust talent pipeline. And for employees, it increases job satisfaction and creates an incentive to stay with your company for the long term.

4) Employee engagement and culture

As mentioned earlier, workplace environment is one of the top drivers of employee turnover. Creating a culture that keeps employees engaged takes some effort, but it doesn’t have to be expensive. Even little changes can make a big difference.

Keep in mind, your company’s values have more impact on culture than free snacks and ping-pong tables. A recent LinkedIn study revealed that 86% of millennials would take a pay cut to work for an employer who shares their values.

5) Technology

Employees expect a simple, intuitive, and seamless experience at work that fosters creativity, enhances productivity, and encourages collaboration. Using top tools at your organization leads to increased job satisfaction for employees.

Look to RPO to Help Improve Retention in Your Company

Leading RPO providers, like NXTThing RPO, offer expertise in finding talent across multiple roles and job families in various industries to help companies better hire employees who will stay for the long-term.

If you’re eager to improve your hiring outcomes and retain new employees longer, NXTThing has the right solution to adapt to your unique needs. Learn more about recruitment process outsourcing by speaking with our experts today.

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