Reducing Turnover: Why is retention so important?
As most HR managers know, the cost of turnover adds hundreds of thousands of dollars
to a company's expenses. While it is difficult to fully calculate the cost of turnover (including
hiring costs, training costs, productivity loss), industry experts often quote 25% of the average
employee salary as a conservative estimate. For example, if the average salary is $20,000/yr the
cost of one employee turnover is $5,000. If you have 30 employees terminating per month, the cost
to the organization equals $150,000/month. Mulitiply that by 12 months and you have $1,800,000 in
added annual expense.
The Cost of Turnover
Use the savings calculator to determine how much money you can save by reducing
When an employee leaves, they take with them valuable knowledge about your company, your customers,
current projects and past history (sometimes to competitors). Often much time and money has been
spent on the employee in expectation of a future return. When the employee leaves, the investment
is not realized.
Loss of Company Knowledge
Customers and clients do business with a company in part because of the people. Relationships are
developed that encourage continued patronage of the business. When an employee leaves, the relationships
that employee built for the company are severed, which could lead to potential customer loss.
Disruption of Customer Service
When an employee terminates, the effect is felt throughout the organization. Coworkers are often
required to pick up the slack. The unspoken negativity often intensifies for the remaining staff.
Turnover spirals into more turnover