The Hidden Costs of Employee Turnover: What It’s Really Costing Your Business
- Turnover costs can range from 30% to 400% of an employee’s salary.
- Replacing a typical entry-level employee usually costs between 30% and 50% of their annual salary.
Employee turnover is likely costing more than you realize. Replacing even an hourly employee comes with hidden expenses that add up quickly.
Ready to understand the real impact?
Understanding Key Turnover Terms
These key turnover metrics are key to evaluating workforce stability and uncovering areas for improvement.
Employee Turnover Rate (ETR): The total percentage of employees who leave your company over a set time—whether by choice or not—impacting productivity and costs.
Voluntary Turnover Rate (VTR): The percentage of employees who choose to leave, highlighting potential issues like job dissatisfaction or better opportunities elsewhere.
Retention Rate (RR): The percentage of employees who are let go due to layoffs, performance issues, or other employer-driven decisions.
New Employee Turnover Ratio (NTR): The percentage of employees who stay with your company over time—higher retention means a more stable and engaged workforce.
Involuntary Turnover Rate (ITR): The percentage of new hires who leave within their first few months, reflecting the success of your onboarding and integration processes.
How to Calculate Your Critical Turnover Data
Overall Turnover Rate (TR) Formula
T = Total Number of Separations During the Period
O = Number of Employees at the Start of the Period
E = Number of Employees at the End of the Period
New Employee Turnover Ratio (NR)
NE = Number of New Employee Separations During the Period
T = Total Number of Separations During the Period
Voluntary Turnover Ratio (VTR)
New Employee Turnover Ratio (NR)
New Employee Turnover Ratio (NR)
The Hidden Costs of Replacing an Hourly Worker
Here’s a breakdown of the often-overlooked costs that make replacing an hourly employee more expensive than you might think.
- 59.7% – Lost Productivity Costs
- 15.1% – Recruitment Costs
- 25.2% – Onboarding and Training Costs
Recruitment & Administrative Costs:
- Job Posting and Advertising: $100 – $300
- HR Time for Reviewing Resumes: $200 – $500
- Interviews (time and resources): $150 – $400
- Background Checks and Drug Testing: $50 – $300
- Termination Paperwork/New Hire Paperwork Processing: $50 – $100
- System and Record Updates: $100 – $200
Total Recruitment Costs: $650 – $1,800
Onboarding and Training Costs:
- Trainer or Supervisor Time: $700 – $1,400
- Training Materials and Resources: $100 – $500
- Reduced Productivity During Training: $700 – $1,100
Total Onboarding and Training Costs: $1,500 – $3,000
Recruitment & Administrative Costs:
- Job Posting and Advertising: $100 – $300
- HR Time for Reviewing Resumes: $200 – $500
- Interviews (time and resources): $150 – $400
- Background Checks and Drug Testing: $50 – $300
- Termination Paperwork/New Hire Paperwork Processing: $50 – $100
- System and Record Updates: $100 – $200
Total Recruitment Costs: $650 – $1,800
Onboarding and Training Costs:
- Trainer or Supervisor Time: $700 – $1,400
- Training Materials and Resources: $100 – $500
- Reduced Productivity During Training: $700 – $1,100
Total Onboarding and Training Costs: $1,500 – $3,000
Lost Productivity:
- Productivity Gap During Vacancy: $2,500 – $3,600
- Learning Curve for New Hire: $1,500 – $3,500
Total Lost Productivity Costs: $4,000 – $7,100
Total Cost of Turnover Per Employee: $6,150 – $11,900
Critical KPIs to Track
These calculations will provide deeper insights into your employee turnover metrics, helping you understand the true cost of turnover and how it affects your overall business performance and workforce stability.
ETR
Cost Per Hire
RR
Your Action Steps to Address Turnover
Make Your Calculations: Start by calculating your turnover rate, cost per hire, and retention rate using the provided formulas. This will give you a clear picture of your current workforce stability and costs associated with employee departures.
Interview Your Workers: Conduct exit interviews and “stay” interviews with your workers to understand why they choose to leave your company and why they choose to stay.
Analyze Your Data: Review your turnover metrics to identify trends and patterns. Look for high-turnover departments or positions, and assess whether voluntary or involuntary turnover is more prevalent. This data will help you pinpoint problem areas and opportunities for improvement.
Conduct a SWOT Analysis: Perform a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to evaluate your organization’s internal and external factors affecting turnover. This will help you understand what’s working well, where improvements are needed, and how external factors may be influencing your employee retention.
S.W.O.T.
Strengths
- What are you doing well?
- What sets you apart?
- What are your good qualities?
Weaknesses
- Where do you need to improve?
- Are resources adequate?
- What do others do better than you?
Opportunities
- What are your goals?
- Are demands shifting?
- How can it be improved?
Threats
- What are the blockers you’re facing?
- What are factors outside of your control?
Talk with an Expert: Consult with workforce experts — like Ōnin Staffing — to gain deeper insights into your turnover challenges. They can offer strategies and best practices for improving retention, enhancing employee engagement, and reducing turnover costs in your specific industry or situation.
Ready to Reduce Turnover?
Unlock the secret to reducing turnover with a simple yet powerful solution: communication.
Ensuring that your workers feel like an essential part of your team is the key to reducing turnover. When employees feel supported and know they belong, they’re more likely to stay.
Ōnin’s Playbook helps you build a more engaged and stable workforce by fostering these connections. Lower turnover, boost productivity and create a workplace where people feel valued. Ready to make it happen?