Employee Turnover Costs & Retention Tips


Employee turnover cost-estimates are as varied as wildflowers in a field.

  • The average cost-per hire is $4,129 says the Society of Human Resource Management based on a human capital benchmark survey of 2,048 respondents reflecting fiscal year 2015.
  • Total direct and indirect costs of replacing a supermarket cashier earning $6.50 per hour is at least $3,637 according a major study of the employee turnover problem in the supermarket industry, conducted by Coca-Cola Retailing Research Council.
  • It costs one-third of a new hire’s annual salary to replace them says the U.S. Department of Labor.
  • The cost of replacing workers range from six months of an hourly worker’s salary to 18 months salary of a professional employee estimates a Hay Group Study.
  • Workforce Magazine – FAX Facts Survey on Employee Turnover indicates turnover costs are more than $10,000 per employee.
  • Cornell University Hotel School study pegged a figure of $11,609 to replace NYC front desk hotel employees.
  • Saratoga’s Human Resource Financial Report suggests an average turnover cost equals one year’s salary and benefits, noting this can vary widely depending on industry.
  • The American Management Council says the cost of hiring and training a new employee can vary from 25 percent to 200 percent of annual compensation, adding costs include customer service disruption, emotional costs, loss of morale, burnout/absenteeism among remaining employees, loss of experience, continuity, and “corporate memory.”

And just the other day Employee Benefit News reported employers pay out 33% of a worker’s annual salary to hire a replacement if that worker leaves. In dollar figures, the replacement cost is around $15,000 for someone earning $45,000 a year (and that doesn’t take indirect costs into account).

So how does an organization slow down employee turnover and its associated costs?

  1. First and foremost, find out what your employees like and dislike about their work and work environment, management and the organization overall. Conduct an employee engagement survey with guaranteed confidentiality built into the process so participation rates are high, responses are forthright and data is reliable.
  2. Use survey data to pinpoint areas specific to your organization. Consult with employees post-survey to confirm areas with the greatest impact on employee engagement and together identify potential actions for change. While competitive compensation and benefit packages can entice some people away, the most common reasons employees give for choosing to leave are:
    • Bad bosses
    • A lack of empowerment (aka micromanagement)
    • Poor organizational culture
    • Better professional growth opportunities elsewhere

Look at your recruitment and on-boarding practices. Is your organization recruiting selectively? Effectively?  More than half of all voluntary quits happen within a year of starting; an astounding 40% of new hires leave within six months. In 2013 despite an unemployment rate of 7.8% two million American’s quit every month that year. In 2016 total turnover across all U.S. industries hit 17.8%, according to CompuData Surveys.

Create a caring culture to cultivate engagement. Pay attention to workloads, deadlines, and other job stressors. Encourage and support camaraderie. Introduce flexible and remote working options. Be receptive to innovation and ideas.

Check in. Introduce frequent one-on-one meetings between managers and staff. Promote these sessions as a time to acknowledge each individual’s valued contribution, to establish strong rapport and to develop the skills to fulfill career aspirations. Conduct periodic Stay Interviews. Ask what employees enjoy. What might they change?

Pay attention to the innate human desire to:

  1. be recognized for a job well done and
  2. be given more responsibility as skills and aspirations evolve.

Provide clear career paths. Promote from within. Offer interdepartmental cross-training when promotional opportunities are limited to support and engage the natural inclination to learn and grow. Trust. Empower. Retain.

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