The Cost of High Employee Turnover

The Cost of High Employee Turnover

It is often said that a company’s most valuable asset is its staff. Therefore when a company experiences a period of high staff turnover, this can have huge costs to the business both financially and also in terms of output and productivity.

Staff leaving to take on employment elsewhere is unavoidable; however, when this starts happening with increased regularity you should look at the underlying reasons for the departures before it begins to cost your company dear.

What is employee turnover?

Employee turnover is the proportion of employees who leave your company during a certain period of time. In most cases this is calculated on an annual basis and represented as a percentage of your total personnel. Figures from XPert HR show that resignation rates are currently at an all-time high of 15.5%, with total turnover (including dismissals and retirements) being 23% on average.

What is perhaps more significant is that 10% of new starters fail to clock up 12 months service before moving on. With the various costs involved in recruiting a new staff member, having them leave the business within the first year represents a considerable investment for relatively low returns.

The true cost of employing a new member of staff

When it comes to hiring a new member of staff, it is easy to assume that once recruitment costs have been allocated for, the cost is over. However, in reality this is far from the case. In fact, even the recruitment process may cost more than you may initially think. Not only do you have the fees to pay to the recruiter, but you should not forget the time costs involved in interviewing potential candidates and undertaking pre-employment screening checks. Added to this you also need to take into account training costs post-recruitment, opportunity costs pre-recruitment, as well as how having a high turnover of staff can negatively affect the morale of your current workforce.

Getting up to peak performance

Getting a new employee through the door is sometimes only the start of the cost due to the time which may be taken to get the employee up to full productivity levels. Depending on the industry you are in and the prior experience of the new recruit, it can take several months, sometimes even up to a year, to get them working at optimum performance levels. Of course, if the employee turns out to be a long serving and productive member of staff then this is well worth the time cost investment. If, however, they leave soon after getting up to speed, your company could be seriously out of pocket.

Opportunity costs

An often overlooked cost of high staff turnover is the lost business opportunities which occur as a result of being short staffed. Unless you seamlessly coordinate the departure of one individual with the hiring of another, you are likely to experience missed business opportunities during this time.

Depending on the industry you are in, this could be because you do not have enough sales people to adequately manage incoming orders, being unable to manufacture your goods in the same quantity, or having to turn potential customers away because you don’t have the capacity to provide them with an appointment.

Retention over recruitment

It costs much less to retain a current employee than to hire someone new. Not only this but in many cases an employee becomes more and more valuable the longer they are with the company due to increased knowledge and a deeper understanding on how the business operates.

With this in mind you should consider whether your recruitment and training costs could be better spent on your current employees and enticing them to remain with your company. This does not necessarily mean you have to give out massive pay rises to keep your staff. Increasing work satisfaction is the number one way of retaining your existing employees and it is surprising how far small gestures can go in the workplace.

This can involve simple things such as offering flexible working hours when needed, dress down days, fresh fruit in the kitchen, and the ability to work from home occasionally. While these don’t have to cost your company a fortune, they can make a big difference to how your employees view work and the enjoyment they get during their time in the workplace.

Create a culture of care and recognise where good work has been done. An employee who knows they are valued where they are is much less likely to start seeking out another role elsewhere. Let you employees know where there is room for progression and offer ongoing training to help them reach this level.

Gary Addison

Gary Addison is an experienced business adviser in the area of redundancy, pensions and other statutory entitlements and writes for a number of UK publications on these topics. He is the managing director of

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