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 groupTurnover cost (percentage of annual salary)
Entry level, unqualified30 % to 50 %
Production employees40 % to 70 %
Qualified employees (hourly rate)75 % to 100 %
Office and administration50 % to 80 %
Professionals75 % to 125 %
Technicians100 % to 150 %
Engineers and specialists200 % to 300 %
Supervisors and team leaders100 % to 150 %
Intermediate managers125 % to 200 %
Upper management200 % 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 GroupAverage SalaryTurnover cost (% of salary)Turnover cost ($)Number of departuresTotal
Entry level, unqualified$ 42 00030 %$ 12 600148$ 1 864 800
Qualified employees$ 65 00075 %$ 48 75035$ 1 706 250
Intermediate managers$ 92 000125 %$ 115 00015$ 1 725 000
Upper management$ 190 000200 %$ 380 0002$ 760 000
Total200$ 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 GroupAverage SalaryTurnover cost (% of salary)Turnover cost ($)Number of departuresTotal
Entry level, unqualified$ 42 00030 %$ 12 600137$ 1 726 200
Qualified employees$ 65 00075 %$ 48 75030$ 1 462 500
Intermediate managers$ 92 000125 %$ 115 00012$ 1 380 000
Upper management$ 190 000200 %$ 380 0001$ 380 000
Total180$ 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.

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