Calculating the Costs of High Employee Turnover

TL;DR: Replacing an employee can cost up to 6–9 months of their salary once you account for lost productivity, hiring, onboarding, and impact on team morale. These costs vary by role and industry but often go unnoticed, hurting profitability. By calculating your specific turnover costs and improving onboarding, leadership, and employee retention, you can significantly reduce financial losses and strengthen long-term performance.

Why Is Turnover So Expensive?

Employee turnover costs businesses thousands of dollars per employee, making it a hidden but powerful factor in profitability and operational stability. Studies estimate that replacing a single employee can cost anywhere from 6 to 9 months of their salary, but the exact impact varies widely depending on role, industry, and internal systems.

And turnover impacts more than just the HR team — it disrupts productivity, drains time, and affects your entire workforce. Many business owners underestimate how many hidden costs are baked into every employee departure. Below are the key factors that drive turnover costs:

• Lost Productivity: When someone leaves, the work doesn’t. Projects get delayed. Coverage gets patchy. And even when you find a replacement, it can take 1–2 years before they reach full productivity in their role.
• Hiring Costs: Replacing an employee comes with costs like job advertising, candidate screening, recruiter hours, and interview scheduling. If the role requires a specialized skillset or a hard-to-find candidate, costs rise even higher.
• Onboarding and Training: Training isn’t just a one-day orientation. It’s an investment that typically equals 10–20% of an employee’s salary over the first 2–3 years. That includes mentoring, lost productivity during training, and software or system setup.
• Errors and Mistakes: New employees are more likely to make costly errors — especially in technical or client-facing roles. Even small missteps can have a powerful impact.
• Culture and Morale: Turnover doesn’t just affect the person who leaves. It impacts the people who stay. High turnover can erode trust, cause disengagement, and trigger additional resignations if left unaddressed.

All of these costs add up — fast.

Calculate Employee Turnover

To understand how turnover affects your company, you’ll need tools that translate HR activity into dollars and cents. The good news? There are several free and easy-to-use calculators designed to help you estimate the cost of each employee who walks out the door.

Here are a few of the most reliable options:

1. Cost of Turnover Calculator

This straightforward tool helps you plug in basic variables — such as ad spend, interview hours, drug screening costs, and average salary — to get a rough estimate of turnover cost per employee It’s ideal for companies that want a simple starting point with minimal setup.

2. SAPLING’s Employee Turnover Calculator

Built as a flexible Google Sheet, SAPLING’s tool lets you adjust each input to reflect your business data. You can see how changes in salary, time-to-fill, or training costs affect your total turnover spend. It's ideal for businesses with more data on hand and a desire to model different scenarios.

3. Predictive Index Employee Turnover Guide

The Predictive Index is a more detailed, instructional resource that walks you through building your own cost model using specific information about your organization. It includes guidance on both tangible and intangible costs.

It's best for leaders who want a deeper dive and a customizable strategy.

Why You Need to Communicate Turnover Costs Internally

Knowing the cost of turnover is only useful if your hiring managers and leadership team understand it — and act on it. One of the biggest missed opportunities in HR is failing to connect operational decisions to real financial outcomes.

When hiring managers are aware of how costly it is to lose a great employee, they:

• Take recruitment more seriously
• Move faster to secure strong candidates
• Focus more on retention and onboarding
• Make better decisions with long-term impact

Framing turnover in dollar terms helps move it from an “HR issue” to a “business issue.” And that’s where real progress starts. Whether you’re running a small team or managing multiple locations, being able to say “this role costs $23,000 to replace” gets attention.

How to Minimize the Cost of Turnover

Once you know how much turnover is costing you, the next step is reducing it through smarter processes and better retention strategies. That doesn’t mean offering perks you can’t afford — it means focusing on the core drivers that matter to your people.

Here’s where to start:

• Improve onboarding. A strong start helps employees feel connected and productive faster.
• Offer competitive benefits. Even basic improvements — like better healthcare access — can boost retention.
• Train your managers. People leave bosses, not companies. Invest in leadership skills and coaching.
• Recognize and reward. Regular, authentic feedback keeps employees engaged and motivated.
• Use exit interviews wisely. Learn what’s working and what’s not before patterns become problems.

The goal isn’t to eliminate turnover completely — that’s not realistic. The goal is to reduce avoidable churn and get smarter about managing the rest.

The Bottom Line: Turnover Is a Cost You Can Control

Employee turnover will always be part of doing business — but with the right tools and strategies, it doesn’t have to be a financial drain. Start by calculating your actual cost of turnover. Then, share that number with your team, connect it to operations, and build a plan to reduce it.

By focusing on both the hard costs (like recruiting and training) and the soft costs (like morale and productivity), you’ll be in a better position to make informed hiring decisions and build a culture that keeps great employees around.

Need help understanding your HR costs or improving retention? Let’s talk about how PRemployer can help you reduce turnover and build a more engaged, efficient team.