The Financial Benefits of
Effective Employee Engagement
It costs less to retain
than it does to replace.
What employee turnover really costs!
source: Forbes Magazine
When you consider all of the costs associated with employee
turnover – including interviewing, hiring, training, reduced productivity, lost
opportunity costs, etc – here’s what it really costs an organization:
it costs between 30-50 percent of their annual salary to replace
it costs upwards of 150 percent of their annual salary to replace
** High-level or
highly specialized employees,
you’re looking at 400 percent of their annual
Dollars & Sense of Employee Turnover
A business loses 12 employees in one year, averaging one per month.
- Six of these employees were entry level, with an average salary of
$40,000. It costs, on average, $16,000 to replace each employee at 40%
of their annual salary, for $96,000 total.
- Four of these employees were mid-level, with an average salary of
$80,000. It costs, on average, $120,000 to replace each employee at 150%
of their annual salary, for $480,000 total.
- Two of these employees were senior, with an average salary of
$120,000. At 400% of their annual salary to replace them, you're looking
at almost $1 million, specifically $960,000.
Add everything up and you're looking at costs of over $1.5 million to replace just 12 employees.
Numbers seem high? Fair enough - there are organizations that
estimate replacement costs to be lower. So let's cut the cost of
replacing all of those employees to the lower end of what it costs to
replace an entry level employee - 30% - across the board. Here's how it
- It's going to cost your company $72,000 to replace the six entry level employees.
- It's going to cost your company $96,000 to replace your four mid-level employees.
- It's going to cost your company $72,000 to replace the two senior employees.
That means that at the absolute lowest estimated end of the
spectrum - your best case scenario - you are looking at almost $250,000
as the cost of the turnover of just 12 employees.