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Prevent Your Company from Losing Money Through Turnover

Allie Kelly

Your organization expends a huge amount of time and energy around hiring. Shouldn’t it expend just as much – if not more – on retention?
Employee attrition is incredibly costly. Not only is it a waste of recruitment funding, but it necessitates even more spending for replacement hires. Furthermore, departing employees may take critical knowledge and skills with them, or possibly damage client relationships.

Calculate the cost of attrition

A study by the Center for American Progress found that for jobs requiring specific skills, the cost of turnover can be 21 percent of an employee’s salary. For higher-level positions, however, the cost is even greater: Some companies spend up to 213 percent of salary to replace a senior- or executive-level employee.
Your organization should also take into account that the average time it takes to fill a position is 42 days, according to the Society for Human Resource Management (SHRM). This is a long period to go through without having your top talent on board.
There are several ways you can calculate the cost of attrition. LinkedIn Learning provides a calculator that takes into account two metrics from SHRM:

  • The cost of replacing an entry-level employee – up to 50 percent of that salary
  • The cost of replacing a “technical or leader-level” employee – up to 250 percent of that salary.

Using this calculator, the cost to replace a senior-level employee or one with specialized technical knowledge is a staggering $312,500.
SHRM also offers a formula for calculating the specific, detailed costs of turnover. Its formula incorporates 11 data points, including annual revenue divided by the number of full-time equivalent employees, the expenses associated with exit interviews and money spent on advertising a vacancy.

Reasons for attrition

To reduce the rate of attrition, it’s helpful for employers to understand the reasons why workers leave.
Of course, not all attrition is the employee’s choice – individuals might be let go for performance-related or disciplinary reasons.
However, voluntary turnover is more common. SHRM found that the annual voluntary turnover rate is 19 percent, compared to the annual rate of involuntary turnover of 8 percent.
People leave their jobs for a variety of reasons, but the three factors most critical to retention are company culture, salary and professional development, according to a study by Glassdoor.
Taking another look at culture, pay and professional development opportunities can help a company keep top talent on board longer. In its “Why Do Workers Quit?” report, Glassdoor found that just a one-star increase in the rating for each of the these three categories increased the likelihood than an employee would stay at a company by 4 to 5 percent.

Reduce attrition

To help lower attrition at your organization, consider the following:

  • Offering competitive pay, regular raises and lucrative bonuses.
  • Build a positive and supportive company culture.
  • Enable professional growth and development among employees.


Allie Kelly


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