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We all have a story of an employee that we worked oh-so-hard to recruit. We spent hours emailing back and forth, on the phone, and in person.

And then finally, you reach your new employee’s much-anticipated start date. Maybe things got off on the right foot, or perhaps it was a slow start. Either way, it didn’t take long for your new star recruit to quit the company.

These stories are common, yet their a huge point of frustration and disappointment each and every time they happen, for each and every HR professional.

Employee Turnover Everywhere

Most growing companies spend time, resources, and money on employee turnover. They struggle to maintain talent and retain employees. Worse yet, most of these companies are not properly calculating the annual costs of such high employee turnover.

When you do run the numbers, you can clearly see the problems caused by this costly trend. The tech industry, which holds the enviable first place position for employee turnover, sees 15% employee turnover each year. This can be easily attributed to the high competition and demand for tech positions combined with the fierce talent war funded by large enterprises.

But even with money to throw at new recruits, large tech enterprises aren’t faring all that well in said talent wars. At Uber, the tech company with the highest employee turnover, the average employee stays with the ridesharing company for a mere 1.8 years, while file file-sharing Dropbox can count on keeping employees for 2.1 years.

And though big tech’s turnover woes may seem beneficial for small and medium-sized businesses, it actually spells trouble for them as well. Their limited resources mean that they simply can’t compete for talent, and a lost employee at a small company equates to a bigger chunk of lost overall company knowledge and productivity.

Calculating Your Annualy Turnover Cost? Better Start

But before you dive straight into creating a talent career development, there are a few parameters to measure and pain points to consider. And by supporting your KPIs with meaningful data and hard numbers, you’ll be able to make the right moves for every stage of your company.

First things first: are you actually calculating your annual employee turnover cost? And why is it important?

Understanding the numbers that drive employee turnover can shed light on the daily decisions we make. It can help justify what we do, mitigate inefficiencies, and help us steer clear of problems.

Let’s look at an example. Sheila is a began her role as a junior marketing analyst immediately following her graduation. Then, when one of the senior business analysts resigned, she found herself one of the company’s most important intersections — analyzing different aspects of the company’s product usage and ROI.

And though her new responsibilities entail more work and longer hours, they didn’t come with a salary raise. Finally, after months of wholly dedicating herself to her role, she met with her manager to ask for a raise that would reflect her greater contribution. During the meeting, she mentioned that she’s been approached by several companies offering more than a 50 percent increase in her current pay. Now, assuming that Sheila is performing above and beyond all expectations, what would you do?

In this situation, a clear calculation of the actual cost to replace Sheila would be the wisest approach. Then, you can decide on a salary increase that works best for both parties.

Things to take into consideration: 

  1. Salary of a potential replacement. How much would it cost in comparison to Sheila’s salary?
  2. Time to recruit a replacement. How many HR and business hours will be dedicated to the interview process?
  3. Cost of an unfilled position. What is the monthly loss of not having anyone in this position?


If you have a clearly defined answer to all of these questions, you’ll be able to better plan your workforce and react to situations like Sheila’s.


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