16 alarming statistics on the cost of employee turnover in 2023

Employee turnover impacts companies in a multitude of ways.

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Most of that impact places a significant financial burden on the company. As noted by O’Connell’s research,
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the cost of employee turnover can be divided into direct and indirect costs. Indirect costs are hidden and harder to quantify but impact the company equally as much.

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Here are some stats about the true cost of turnover.

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Want to explore other options to improve engagement?

• Consider implementing an engagement platform, app, or solution. 
• Invest in virtual team building, especially for work, even if they’re free.

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Key statistics on the cost of employee turnover

• The cost of replacing an individual employee can range from 0.5 to 2 times the employee's annual salary.
• Replacing C-level positions can cost up to 213% of their yearly salary.
• Indirect costs (due to impact on productivity and morale) account for two-thirds of the total cost. 
• Lost productivity costs U.S. businesses $1.8 trillion every year. 
• Turnover costs U.S. businesses an estimated $1 trillion annually.

Read on for more!

The direct costs of employee turnover

Direct costs refer to the expenses incurred while searching for and hiring a replacement employee. They usually include separation (like severance pay), hiring (advertising, screening, and interviewing candidates), and training costs.

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1. The cost of replacing an individual employee can range from 0.5 to 2 times the employee's annual salary. (Gallup)
2. Replacing an employee costs between 75% and 200% of the worker’s annual pay (Monster).
3. Employers need to spend the equivalent of six to nine months of an employee’s salary to find and train their replacement. (SHRM)
4. The cost of replacing an hourly employee can be up to $4,500. (American Progress)
5. An employee in a technical position costs more, at 100% to 150% of their salary. (G&A Partners)
6. C-level positions are even higher, up to 213% of their salary. (SHRM)
7. For all positions except executives and physicians, the typical (median) cost of turnover is 21% of an employee’s annual salary (American Progress).

These provide an incomplete picture. Disengaged employees already have a major impact on their team–before they even leave. 

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That’s why improving employee satisfaction and understanding the drivers of employee retention are essential in combating turnover. Indirect costs balloon these numbers even more.

The indirect costs of employee turnover

Indirect costs are the intangible expenses incurred by a company when an employee leaves, such as loss of productivity, morale, and institutional knowledge.  

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8. Two-thirds of all sunk costs due to turnover are intangible, including lost productivity and knowledge. (SHRM)
9. When companies experience extended job vacancies, 81% report that it harms their company. They include work not getting done, disengaged or unmotivated workers, low employee morale, revenue loss, and delivery time delays. (Express Employment Professionals)
10. Lost productivity costs U.S. businesses a shocking $1.8 trillion every year. (HubSpot)
11. It can take 1-2 years for a new employee to reach the same productivity level as a high-performing employee who leaves. (Josh Bersin)
12. Even after hiring a replacement, it takes months for them to become productive. If the team member who left could bring in $100,000 in revenue, your company will experience $25,000 less in income and profits for those months. (Forbes)

You can calculate the cost of employee turnover in your company. 

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Compare those to the cost of working with software, improving engagement, or developing a great remote culture. These take time and resources, but they’ll provide ROI if they reduce your turnover. 

The overall impact on company finances

The cost of employee turnover can vary based on several factors, such as industry, region, and company size.

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This is how the costs break down on a larger scale.

1. Employee turnover has cost US industries more than $630 billion. (Work Institute)
2. The cost to U.S. businesses is estimated at $1 trillion annually. (Gallup)
3. The cost of talent shortage varies, but it is projected to reach $435.7 billion for the US, $90 billion for the United Kingdom, and $147.1 billion for China. (Catalyst)
4. Most reports do not include other costs such as consuming management time, customer impact, negative reputation, morale, etc. The actual cost is at least double that, or $170,000 per year. In smaller firms, the costs are even higher. (Midlands Tech)

Pay attention to the average turnover rates in your industry to see how your company’s performing. Smaller companies suffer more from turnover because every loss hits the bottom line.

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Want to do better?

• Focus on employee retention and ensure remote employees stay connected.
• Take inspiration from companies that have high satisfaction.
• Keep up to date with the latest stats on job satisfaction, remote work, and employee engagement.

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References

Dive deeper into the research yourself!

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• Gallup: This Fixable Problem Costs U.S. Businesses $1 Trillion
• Monster: Why People Leave Their Jobs
• SHRM: Essential Elements of Employee Retention
• American Progress: Significant Business Costs to Replacing Employees
• G&A Partners: Calculating The Cost Of Employee Turnover
• SHRM: To Have and to Hold
• Express Employment: Companies Struggle with Employee Turnover
• HubStop: How to Stop the Most Common Productivity Prohibitors
• Josh Bersin: Employee Retention Now a Big Issue
• Forbes: The Cost Of Turnover Can Kill Your Business
• Work Institute: 2020 Retention Report
• Catalyst: Turnover and Retention
• Midlands Tech: Measuring the Real Cost of Employee Turnover

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