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Employee Turnover - How much does it really cost to replace an employee?

Employee Turnover - How much does it really cost to replace an employee?

Haelee Reis
Haelee Reis
Head of Marketing and Program
Haelee Reis
March 16, 2023

"We have loads of tech already, drop me an email in a few months and we'll see if we can afford it"

This is one of the most concerning things our team hears when we chat to leaders and managers.

Why? Because we know your team is your number 1 asset - your organisation needs them to succeed, and your teams need to be supported to do their best work together. 

But waiting a few months to take action might be the difference between retaining your top performers or losing them. 

Your team needs more connection and belonging

More than half (54%) of employees surveyed said that a strong sense of community — having great coworkers, celebrating milestones or uniting over a common mission — kept them at a company longer than was in their best interest - source

Countless amounts of research show employees want more meaning, connection and belonging in work. They want to be part of organisations that align with their values, are making a difference, and have a great culture. They want to feel inspired and know they're cared about. 

Building a great culture and retaining your best people isn’t about fleeting feel-good moments that are quickly forgotten. It’s not a part-time gig, nor is it something you can dip in and out of once a year. 

It’s something that if ignored, even for just a few months, can cost your organisation thousands per employee.

Let's unpack this a little more…

Regretted Attrition: The common (and avoidable) scenario that costs in organisation thousand of dollars per employee

Picture this…

One of your top performing employees is struggling, they're not really enjoying work, but they're getting enough done to fly under the radar. 

A month flies by and they're still feeling the same way - disconnected, unmotivated, and uninspired. 

Another month or two rolls on and it's annual performance review time where managers check-in with their team members to see how the last 12 months have been. 

At this stage the employee has been casually browsing jobs on LinkedIn for weeks and had actually applied for 2. 

Another 2 weeks passes before they’re finally sitting in their review session.

“Unfortunately I’m handing in my notice. I’ve been offered an exciting new job”

It's here that the manager first becomes aware of how their team member is/was feeling, but at this point it's too late. 

So why is all this important?

Well other than the challenge of replacing an employee. The cost to the organisation is bigger than first thought. 

The real cost of replacing an employee 

Employee Salary: $60,000

Cost of replacing: $40,000

66.6% of employees annual salary

(Gallup states the cost can be up to 2x the employees salary)

Cost of employee disengagement: $5,000

3 months disengagement prior to leaving the org.

(Disengagement costs 18% of an employees annual salary, Gallup)

= $45,000 total cost to the organisation

Per employee. 

On an average salary. 

Costed out very conservatively. 

(not to mention the negative impact on culture and loss of corporate knowledge)

Let those numbers sink in for a second… 

Now think about how many people have left your organisation in the last 12 months. 

3, 5, 10?

3 employees = $135,000 

5 employees = $225,000

10 employees = $450,000

“Globally, 67% of the workforce is not engaged. In a company of 10,000 employees with an average salary of $50,000 each, the cost of their disengagement is $60.3 million annually. So any budget reduction strategy that harms engagement can harm productivity” Gallup

Why you can’t afford to wait  

The question isn’t can you afford it. 

The question is - can you afford to wait a few months before checking in with your people and making the changes needed to keep them in your organisation? 

Our platform will help you:

  • connect with your team regularly,
  • understand how your team are feeling, 
  • identify potential blinds spots,
  • take data-driven action,
  • avoid costly issues (like the scenario above)

Learn more about our Team Experience™ Platform here 

** calculations based on Gallup reports and findings here and here **

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