The Real Cost of Employee Turnover

Turnover is more than just a vacancy—it’s a costly disruption. Whether you're a small business or a large organization, losing employees impacts your bottom line more than you might realize. From recruiting replacements to lost productivity, the hidden expenses of employee turnover can quietly drain thousands from your budget each year.

At Ascendare Group, we help businesses uncover and mitigate these hidden costs through strategic workforce planning, leadership development, and retention optimization.

Understanding the Financial Impact

Did you know that the average cost to replace a single employee is approximately 50% of their annual salary? For higher-level roles, that number climbs even further. Yet most businesses only consider surface-level expenses like job postings or severance—missing the larger picture of what's truly at stake.

Let’s take a closer look.

Average Turnover Costs by Position Type

The cost to replace an employee varies significantly depending on their role, level of specialization, and responsibilities. Here's a breakdown of average replacement costs as a percentage of the employee’s annual salary:

Where the Money Goes: Categories of Turnover Costs

Employee turnover costs fall into three major categories:

1. Separation Costs

These are the costs tied directly to the departure of the employee. They may include:

Severance pay
Unemployment insurance claims
Continued benefits or COBRA coverage
Time spent processing termination paperwork, exit interviews, and account deactivation

While severance or benefits are easy to quantify, soft-dollar costs—like the time HR or IT spends on offboarding—are just as real, though often overlooked.

2. Recruitment Costs

Replacing an employee means launching a full hiring campaign. These costs include:

Job advertising
Recruitment agency fees
Background checks and drug testing
Interview coordination and internal time from HR and hiring managers
Onboarding and training for the new employee

Even if you avoid third-party recruiters, internal time alone can amount to dozens of hours spent vetting, interviewing, and onboarding the right candidate.

3. Productivity Costs

This is the most underestimated (yet most impactful) area of loss. Productivity costs occur when:

The role remains unfilled, forcing others to take on additional work
Temporary help underperforms due to lack of training
Institutional knowledge and experience walk out the door with the departing employee
New hires require time—weeks or even months—to reach full productivity

These costs don’t show up on a ledger but are felt across teams and performance metrics.

Calculating Your True Turnover Cost

To understand the financial implications of turnover in your own organization, consider both hard and soft costs:

Step 1: Identify Hard Costs

Start by gathering:

Overtime wages paid to cover the role
Temporary staffing or consultant fees
Recruiting expenses (ads, background checks, etc.)

Add those up, then subtract the amount you didn’t pay the departed employee while the role was vacant (including wages, taxes, and benefits). This gives you a baseline for hard-dollar impact.

Step 2: Estimate Soft Costs

Estimate hours HR and managers spent reviewing resumes, interviewing, onboarding
Multiply by their hourly rate
Factor in training costs and time to ramp up new hires
Estimate impact of lost productivity across the team

These calculations often reveal that soft costs can equal or exceed the hard costs—especially in specialized or leadership roles.

Why It Matters: Turnover Hurts More Than Your Budget

When turnover is high or poorly managed, it doesn’t just impact finances—it harms culture, morale, customer service, and team performance. Employee exits disrupt team cohesion, delay project timelines, and often result in remaining employees feeling overburdened or disengaged.

That’s why proactive retention strategies are key to long-term success.

How to Reduce Turnover and Protect Your Bottom Line

Preventing turnover is about more than offering a competitive salary. It’s about creating an environment where employees want to stay and grow. Here’s how:

Invest in leadership development to foster engaged, effective managers
Enhance career growth opportunities through training and promotion paths
Conduct stay interviews to proactively understand what keeps employees committed
Optimize onboarding and training to build connection and competence early
Benchmark compensation and benefits to ensure you remain competitive in your industry and region

At Ascendare Group, we use data-driven diagnostics to help organizations measure, monitor, and improve their retention strategies—turning potential costs into long-term value.

Ready to Measure Your Turnover Risk?

We’ve built a custom turnover cost calculator to help you estimate the real financial impact of employee exits in your organization. Start by selecting a position type and salary range, and we’ll give you a data-backed estimate—plus tips for cutting those costs through better systems and smarter strategy.

Annual Salary