How to Estimate the Financial Impact of Turnover

There are several turnover costs calculators available online, but there is really a simple way to demonstrate the costs of turnover and the impact of employee engagement on those costs. 

The Society for Human Resource Management (SHRM) estimates that companies will spend about 1.5x an employee’s salary to replace that individual. Using this shortcut, you can easily estimate the costs of turnover if you have access to salary information. Even if you don’t have salary data for a particular position, you can still estimate turnover costs using the average salary of your organization or  BLS information. 

Example Estimate

Using the SHRM metric, you would estimate that a 100 person organization with 20% turnover and an average salary of $50,000 per year spends about $1,500,000 on turnover per year (100 employees * 20% turnover * $75,000 per employee replaced). 

Factors that Influence the Cost of Turnover

Vacancy of Role:

• How much money is the company losing by not having a person in-seat, such as new business quotas?
• How much money is the company saving by not paying the salary and benefits of the individual. 
• How much money is the company losing by paying overtime to other employees to help fill the responsibilities of the vacant role? 

Hiring Costs:

• Time and resources to recruit for/ fill the vacant position
• Time and resources associated with onboarding and training the new hire.