How much does turnover cost?
As I’ve mentioned several times, employee turnover is costly for an organization. Very costly, in fact. To help you better understand the impact, here are some enlightening statistics I found.
A few years ago, the Coca-Cola Company estimated that it cost $3,637 to replace a minimum-wage employee (New Ideas for Retaining Store-Level Employees, Coca-Cola Retailing Research Council, 2000). In 2009, a University of Arizona study estimated the cost of replacing a general practitioner in a hospital at $115,554, a specialist at $286,503, and a super specialist surgeon at $587,125.
When you factor in all the costs, including the more hidden ones (lost productivity, missed business opportunities, integration efforts, impact on employee morale, etc.), you realize that turnover can lead to staggering expenses. Here’s an interesting chart* to illustrate these costs.
| Job group | Turnover cost (percentage of annual salary) |
| Entry level, unqualified | 30 % to 50 % |
| Production employees | 40 % to 70 % |
| Qualified employees (hourly rate) | 75 % to 100 % |
| Office and administration | 50 % to 80 % |
| Professionals | 75 % to 125 % |
| Technicians | 100 % to 150 % |
| Engineers and specialists | 200 % to 300 % |
| Supervisors and team leaders | 100 % to 150 % |
| Intermediate managers | 125 % to 200 % |
| Upper management | 200 % to 400 % |
*Source: “Proving the value of HR: How and Why to Measure ROI” by Jack J. Phillips, Patricia Pulliam Phillips
But what is the cost for a company with a turnover rate of around 11%? Let’s imagine a company with 1,000 employees and a turnover rate of 20%. The simplified breakdown of this organization into 4 job levels is as follows:
| Job Group | Average Salary | Turnover cost (% of salary) | Turnover cost ($) | Number of departures | Total |
| Entry level, unqualified | $ 42 000 | 30 % | $ 12 600 | 148 | $ 1 864 800 |
| Qualified employees | $ 65 000 | 75 % | $ 48 750 | 35 | $ 1 706 250 |
| Intermediate managers | $ 92 000 | 125 % | $ 115 000 | 15 | $ 1 725 000 |
| Upper management | $ 190 000 | 200 % | $ 380 000 | 2 | $ 760 000 |
| Total | 200 | $ 6 056 050 |
A 20% turnover rate would cost this company $6,056,050 per year! I don’t know about you, but these figures make me dizzy. So go ahead! Calculate your annual turnover rate and the associated cost. Do it before you go on vacation, so you have time to digest the information!
Remember, every 1% reduction in your turnover rate represents significant added value for your organization. Let’s go back to the previous example, but lowering the turnover rate to 18%.
| Job Group | Average Salary | Turnover cost (% of salary) | Turnover cost ($) | Number of departures | Total |
| Entry level, unqualified | $ 42 000 | 30 % | $ 12 600 | 137 | $ 1 726 200 |
| Qualified employees | $ 65 000 | 75 % | $ 48 750 | 30 | $ 1 462 500 |
| Intermediate managers | $ 92 000 | 125 % | $ 115 000 | 12 | $ 1 380 000 |
| Upper management | $ 190 000 | 200 % | $ 380 000 | 1 | $ 380 000 |
| Total | 180 | $ 4 948 700 |
That’s still a difference of $1,107,350… That’s where your added value lies: finding the program or implementing the initiative that will enable you to reduce turnover by 2% in your organization.
