ATD Blog

How to Calculate the High Cost of Employee Turnover

Friday, July 31, 2015

There’s a disease silently infecting the modern American business world today. It lurks in the background, silently eating away at the bottom line of your company. This silent destroyer of business profits is known as your “employee turnover equation,” and it affects small businesses and corporations alike.

I’ll not bore you with stats detailing the billions of dollars lost annually to this problem. In reality, when the numbers get that large, people tend to accept them as the norm. What you need is a simple employee turnover calculator to understand exactly how it is affecting your business. Once you’ve got an idea what you’re losing, there are a few simple steps you can implement to regain some of that lost profitability.

Most businesses know, on some level, that the cost of employee turnover is a problem. They view it as a mere inconvenience that must be dealt with, a cost of doing business. That’s until you put a dollar amount on its effect. Even seeing an “estimate” of what you’re losing will shock you!
See for yourself!

Turnover Calculator

Here’s an employee turnover calculator to help you understand just how much money employee turnover truly costs your business each year. Once business owners, HR managers, talent development leaders, CFOs, and CEOs get a look at the real numbers lost each year, quarter, or even a single month, they need to take a hard look at what needs to be done to slow that tide.

Case in Point: Let’s say you have 100 employees. Each year, you have 15 percent turnover. When those employees leave for whatever reason, you have to train new employees to fill the open positions. If it takes two weeks to train each new employee, at 40 hours per week, on an $8 hourly salary for the new employee, and a $25 hourly salary for the trainer, you’re looking at $42,768 per year! And that doesn’t even cover recruiting!

These are just blind estimates, though.  Take a minute to input your data into the employee turnover calculator to get a true number for your own business. Prepare to be shocked!


Retainment Strategies

While you can’t stop employee turnover completely, you can take steps to diminish it. 

  • Examine your company culture for ways to improve employee engagement.
  • Find ways to inspire employees to take more pride in their job by asking them for input on how to do their tasks more efficiently. 
  • Survey employees and ask their thoughts on how the workplace can be improved (and then implement do some of the suggestions!). 
  • Create an employee recognition platform that recognizes people for their effort, and awards them regularly and consistently.

It’s a proven fact: When employees are engaged, they work harder, are more efficient, and take pride in what they do. A world-class atmosphere of teamwork develops, and a cooperative, competitive spirit blossoms—encouraging everyone to be a better employee and a better person. People stop coming to work because they have to, and start coming because they want to. They are more productive and happier. That means fewer performance-based layoffs and fewer top producers leaving your company for greener pastures.
Engaged employees have significantly lower levels of absenteeism, on the job accidents, and fewer HR issues. What is that doing to your bottom line every year? According to Gallup Research, companies with high levels of employee engagement are 400 percent more profitable. Yes, 400 percent!! Pair that increase in productivity and profitability with the savings from reduced turnover, and your business can expect exponential growth in sales and profits.

Many of the factors affecting true employee engagement need to be customized for each business. A great place to start is an employee survey. Find out what employees think about the business and work environment. You may uncover hidden systemic issues that contribute to your high rate of employee turnover.

Another excellent place to start is a consistent recognition platform. One of the most basic human needs is to feel appreciated. From a business perspective, a recognition program can reward and inspire employees while at the same time achieving company goals and objectives. It’s not magic; it's all about criteria. Check out this video for more about that: “How can an Employee Recognition program increase profitability.”


Bottom Line

Employee turnover is an infection, but it doesn’t have to be a killer. The first step is using a simple employee turnover calculator to put a dollar amount on just how much it costs your business. Once you understand that, you can easily justify any investment in employee engagement and employee recognition to shrink your turnover rate drastically. Not only will you be saving the headache of replacing many of your employees, but you’ll be investing in the massive growth potential and profitability of your business.

To learn more about hiring best practices that can reduce turnover and improve employee morale, join us for Hiring the Right People, an ATD virtual event on December 3, 2015.

Matthew Coleman is the marketing manager for MyEmployees. Connect with him on Twitter; @matthewjcoleman.

About the Author

Matthew Coleman is the marketing manager for MyEmployees. Connect with him on Twitter; @matthewjcoleman.

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