A study was done by Employee Benefit News and they concluded that the average cost of employee turnover was 33% of the employee’s annual salary. With the median salary in the United States at $47,060 in 2019, this means the average cost of losing an employee in the United States is $15,529.
However, other studies suggest that percentage is higher, with some studies concluding that the cost is closer to 50% of the annual salary, and still other studies looking at the cost by position type, concluding that the cost for more skilled positions can be even up to 150% of their annual salary.
Costs can be direct: cost of hiring an agency to find a replacement, severance package, legal fees, etc. They can also be indirect. Time spent hiring and interviewing, knowledge lost, time spent training a new hire. There’s also opportunity costs and reduced efficiency while a replacement is found.
Another thing often looked past is decreased employee morale. Perhaps it leaves the remaining employees feeling like they are next on the chopping block, or maybe they feel a sense of personal loss if the employee who left had close friendships.
These types of intangible, indirect costs are hard to calculate, and it is why you see such a wide range of percentages suggested in studies.
The conclusion here is employee turnover is costly. But the good news is that it is probably more preventable than you might think.
Why do employees leave?
According to a retention report performed by Work Institute, 75% of all employee separations are preventable. Studies like these antagonize business owners because knowing common reasons why employees leave, and knowing why your employees are leaving can be two very different things.
This is where exit interviews can be quite important. But even exit interviews aren’t an end-all cure. In order for them to work, the employee has to be willing to provide truly honest feedback, and the employer has to be able to receive it and grow from it. Both of these things are easier said than done.
According to HRdive.com, here are a few of the most common reasons why an employee leaves.
- Career development (22%)
- Work-life balance (12%)
- Managers’ behavior (11%)
- Compensation and benefits (9%)
- Well-being (9%).
If you are looking for ways to reduce employee turnover, start by addressing these top 5 common things!