Employee turnover doesn’t just hurt morale. It can seriously impact your bottom line. In this article, you’ll learn what turnover really costs, how those costs add up, and practical ways to keep your best people from walking out the door.
The Average Cost of Employee Turnover
According to the Society for Human Resource Management (SHRM), replacing an employee can cost from 50 to 200% of their annual salary, depending on the level you’re hiring for (entry-level, management, C-suite, etc.). Other sources report values up to 400%:
- Replacing entry-level people will cost 30-50% of their annual salary
- Mid-level employees can cost over 150% of their annual salary to replace
- A high-level or specialized employee will cost 400% of their annual salary to replace
Via Stratus HR.
How the Cost of Employee Turnover is Calculated
There are three important costs that, when combined, add up to the total turnover cost.
- Separation cost: Includes severance pay, benefits due, administration costs, exit interviews, and payroll changes. There are also costs from having someone make up for lost hours.
- Recruitment cost: Hiring replacements involves advertising, interviewing, recruiter commissions, and onboarding. Once your new hire starts, you’ll also need to invest in training.
- Productivity cost: It takes time for a new hire to reach full productivity. U.S. companies average one to six weeks to refill a position and an additional four to six months for full ramp-up. During that time, productivity takes a hit.
The Other (Non-Financial) Costs of Employee Turnover
Losing a productive, skilled employee costs an organization more than just dollars. It can disrupt leadership, erode trust, and slow innovation, directly impacting company culture.
- Leadership: High turnover strains leaders, who may become overextended or disengaged, negatively affecting morale.
- Trust: When an employee leaves, their peers may see leadership as cold and detached or feel replaceable
- Innovation: Tenured employees hold valuable knowledge that helps them identify patterns, avoid past mistakes, and improve systems. New hires may have fresh ideas but won’t have the full picture or history of your company.
What Causes Turnover
Common causes of employee turnover include:
- Overwork/scheduling issues
- Inconsistent management styles
- Lack of recognition
- Few opportunities for professional development
- Limited advancement
- Low salaries and pay raises
- Inadequate benefits
- Poor company culture
- Personality/working style misalignment between team members and leadership
How to Reduce Employee Turnover
There’s good news! A Gallup poll reported that 42% of turnover is preventable. Here are actionable ways to keep employees happy for years to come:
Have More Conversations About the “Big Stuff”
When employees were asked what would have kept them from resigning, 30% reported that additional compensation/benefits would have done the trick. 21% reported that more positive interactions with their manager would have kept them from leaving. Regular check-ins can help with both by giving employees a voice on pay, recognition, and growth.
Offer Competitive Compensation and Benefits
Keeping employees happy means offering competitive starting pay, a robust benefits package, and perks like wellness or incentive programs. Compensation should reflect inflation, cost of living, and performance in addition to skill, experience, education, and job type.
Remove Barriers and Evaluate Structure
Nearly a quarter of preventable turnover could be avoided if managers addressed organizational issues (13%) or problems with staffing, workload, or scheduling (9%). Encourage open dialogue about these issues. When employees feel heard and empowered to offer solutions, it fosters greater engagement and trust.
Focus on Work/Life Balance
Hybrid work schedules have been a big topic since the pandemic, with recruiters saying that these flexible schedules can contribute to increased productivity, improvements to culture, successful attraction of top talent, and reduced turnover. While not every organization can go hybrid, consider options like flexible hours, early-release Fridays, or community volunteer time.
Keep People Motivated Through Incentives
Rewards for a job well done or tenure motivate employees to stay with an organization long-term. The incentives that employees want depend on many factors, including age group. Cash and gift cards are big, but when those are removed as reward options, travel rewards are the most preferred, even above time off and flexible work.
Want more ideas? Check out our resource, “Retaining Top Talent: What Organizations Can Do to Keep Employees In-House.” Here’s a summary of retention ideas that the article provides:
- Provide advancement/development opportunities with a clear roadmap
- Enhance your company culture
- Set clear expectations, including about compensation
- Reward longevity and performance
- Focus on keeping managers happy
Prevent Employee Turnover with Incentive Consulting and Custom Programs from Creative Group
If your current incentive strategy isn’t keeping employees engaged, we can help. Creative Group designs premium rewards programs aligned with your people and goals. From global incentive travel and memorable events to awards and gifts, we’ll help you create experiences that inspire loyalty and performance.
Contact our experts today to get started and help your employees achieve their greatest potential through powerful, purpose-driven incentives.
This post was originally published in October of 2017 but updated and republished in October 2025.
