Turnover Costs and the Benefits of Retention Programs

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.

How to Calculate Your Critical Turnover Data

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

NE = Number of New Employee Separations During the Period

T = Total Number of Separations During the Period

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.

• 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

• 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

• 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

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.

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.

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.