The cost of employee turnover (and how to calculate it for your business)

When an employee quits, the first cost people think of is finding someone new. But that's only part of it. Between the moment someone leaves and the moment their replacement works at the same level, months can pass, and during that time your business pays in ways that never show up on an invoice.

In a small or medium business this weighs even more. When there are few of you, one person leaving is felt across the whole team. Knowing what turnover costs you helps you decide how much it's worth investing in keeping people.

The visible costs: recruiting and training

These are the easiest to see, because they involve spending or time you can count:

• Posting job ads or paying a recruiting agency.
• The hours of whoever reviews resumes, runs interviews and coordinates tests.
• Onboarding paperwork, equipment and accounts for the new person.
• Training: courses, materials and, above all, the hours colleagues spend teaching instead of doing their own work.

Internal hours are usually the most underestimated cost. If your shift manager spends ten hours interviewing and another twenty teaching, that time has a value even if it isn't paid separately.

The costs you don't see at first glance

These are harder to measure, but they're often the biggest:

• Vacancy time: while the role is empty, someone stops doing that work or does it halfway. That can mean sales that don't close, orders that run late or shifts with fewer people.
• Productivity while ramping up: the new person doesn't perform at full speed from day one. For weeks or months they produce less while they learn the job.
• Extra load on the team: those who stay cover the gap. That can mean paid overtime, fatigue and, if it lasts, more resignations.
• Knowledge that walks out: how each customer likes to be served, where things are, which supplier answers quickly. Much of that isn't written down anywhere.
• Lost customers: if the person dealt directly with customers, some may follow them or simply notice that the service changed.

A worked example

Imagine a shop where a salesperson earning $1,000 a month leaves. The numbers are made up, just to show how the math works:

• Recruiting: a paid ad and about 15 hours of interviews by the owner. Say $300 in total.
• One month of vacancy: the rest of the team covers with overtime worth about $400, and some sales are lost, which you estimate at $300.
• Training: a colleague spends half their time for two weeks teaching. About $250 of their salary.
• Productivity while ramping up: the first month they perform at half speed, the second at three quarters and the third almost fully. That's roughly $850 of lost work.

Adding it up, this salesperson leaving costs about $2,100, more than two months of their salary. And that's before counting lost knowledge or customers who may have left. If four people with a similar role leave in a year, the cost goes past $8,000.

Your numbers will differ depending on the role. A role that needs lots of training or customer relationships costs more than one people learn in a few days. To run the numbers with your own data, there's a free “Employee turnover cost calculator” on the site.

How to reduce turnover

You won't stop everyone from ever leaving, and some departures are healthy. But you can avoid the ones that could have been prevented. Three things help a lot:

• A good start. The first months are when it's easiest for someone to regret joining. An organized welcome, a go-to colleague and check-ins at one and three months lower that risk. A short onboarding survey tells you what's failing at that stage.
• Listen to people who leave. An exit survey shows you the real reasons behind resignations. If several people mention the same thing, that's your first priority.
• Listen to people who stay. Stay surveys or pulse surveys ask your current team how they're doing, before they decide to leave. They're short, run every few months and warn you when something starts getting worse.

The last one is the most often forgotten. An exit survey arrives late: the person is already gone. Asking the people who stay on a regular basis lets you act while there's still time.

Use the number to make decisions

Knowing what a departure costs changes the conversation. If each resignation costs you around $2,000, spending a few hours a month improving onboarding or listening to the team stops looking like an expense and starts looking like savings. It also helps you weigh concrete options, like a small raise to keep a key person versus the cost of replacing them.

How to do it with SurvIQ

SurvIQ has free templates for onboarding, exit interviews, climate and engagement, and eNPS, so you can listen to your team at every stage. You can make surveys anonymous, share them by link, email, WhatsApp or QR code, and people answer from their phone without creating an account. Results update in real time with charts. The free plan is free forever, and the turnover cost calculator on the site helps you put a number on what's at stake.