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The hidden cost of employee turnover is rarely found in recruiting budgets. The biggest expenses often come after an employee leaves, through lost productivity, manager time, knowledge drain, and the increased risk of burnout among remaining employees. Most turnover calculators miss these costs, which means many organizations are underestimating the true financial impact of employee turnover.
What are the direct and indirect costs of employee turnover?
Direct turnover costs
1. Recruiting expenses
Recruiting expenses include the resources required to attract qualified candidates after an employee leaves. These costs often include job board postings, employer branding efforts, recruitment software, agency fees, candidate sourcing, and recruiter time spent filling an open role.
2. Hiring costs
Hiring costs cover the steps required to assess and select a replacement employee. These expenses include candidate screening, interviews, assessments, background checks, reference checks, offer negotiations, and the time managers spend participating in the hiring process.
3. Onboarding and training costs
Once a replacement is hired, organizations must invest in onboarding, training, equipment, systems access, compliance requirements, and role-specific education. New hires also need time from managers, HR teams, and colleagues to support their initial weeks integrating into the organization.
4. Temporary staffing costs
Temporary staffing costs affect organizations that use temporary workers, contractors, overtime, or internal backfills to keep business operations running while positions are still open and in the process of being filled. Having temporary staff in place helps prevent disruptions to customers and business operations, but they typically create additional labor costs.
However, employees who take on this additional work may experience increased stress and workload pressure. To avoid burnout at work, 25% of employees surveyed for the 2026 State of Recognition Report say recognition helps ease stress caused by understaffing, reinforcing how workforce pressure becomes a people risk when teams are stretched too thin.
Indirect turnover costs
1. Productivity gaps
Productivity gaps occur between the time an employee leaves the organization and when a new hire reaches their full productivity. During this transition period, projects can slow down, workloads may increase, and teams often operate below normal capacity.
2. Manager time
Manager time reflects the hours spent recruiting, interviewing, onboarding, training, and supporting a replacement employee. Every hour dedicated to replacing talent is time that can’t be spent coaching employees, developing skills, or advancing strategic priorities.
3. Institutional knowledge loss
Institutional knowledge loss occurs when employees leave with valuable expertise, historical context, customer relationships, and knowledge of internal processes. While some information can be documented, most of it is gained through experience and is difficult to replace quickly.
4. Burnout and workload redistribution
Job burnout and workload redistribution occur when remaining employees take on additional work while a position remains open. Increased workloads can create stress across the team and make it more difficult to maintain performance over time.
5. Secondary turnover
Secondary turnover refers to when one employee’s departure contributes to additional resignations. Higher workloads, team disruption, and uncertainty can make remaining employees more likely to consider leaving as well, especially when research from Achievers Workforce Institute’s (AWI) State of Recognition Report shows only 23% of employees say communication is clear during uncertainty and only 18% feel informed when changes affect their job.
How much does employee turnover cost a company?
Staff turnover typically costs a company between 0.5 and 2x the annual salary of the churned employee, but replacement costs tell only part of the story.
These costs vary significantly between organizations with similar salaries. Two companies may spend nearly the same amount on recruiting and hiring, but experience different business outcomes depending on how quickly they restore productivity, retain institutional knowledge, and support the employees left behind.
The biggest difference is the productivity lost during the transition. According to Gallup’s State of the Global Workplace 2026 Report, low employee engagement cost the global economy approximately $10 trillion in lost productivity in 2025. Company turnover can add to those losses by disrupting workflows, delaying projects, and placing additional pressure on remaining team members.
What is the average cost of employee turnover per employee?
The average cost of employee turnover per employee can range from 30% to 400% of annual salary, according to external sources, depending on the employee’s role and level of specialization.
Estimates include:
- Entry-level employees: 30% to 50% of annual salary
- Mid-level employees: 150% or more of annual salary
- Senior or highly specialized employees: approximately 400% of annual salary
However, turnover becomes more expensive when an employee is harder to replace, takes longer to reach full productivity, or leaves behind specialized knowledge and relationships that can’t quickly be transferred.
The more knowledge and organizational value that leaves with an employee, the less useful salary becomes as the only measure of turnover cost.
How do you calculate the cost of employee turnover?
To calculate employee turnover, divide the number of employees who left during a specific period by your average number of employees for that period, then multiply by 100.
Formula
Example
If 5 employees left over the year and your average headcount was 80:
Your turnover rate shows how frequently employees are leaving, but it doesn’t show the full cost to the organization. Pair the rate with recruiting, productivity, manager time, and other turnover costs to understand the wider business impact.
Steps to reducing the cost of staff turnover
1. Set a weekly recognition expectation for managers
Setting a weekly expectation for managers to recognize their staff makes appreciation a consistent part of the employee experience.
Ask managers to recognize at least one contribution from each team member every week. Recognition should name the specific action, explain its value, and connect it to a team goal or company value.
Frequent recognition and behavior reinforcement help employees understand what good work looks like and show that their efforts are noticed. And when staff feel appreciated, research from the 2026 State of Engagement Report shows that they’re 17x more likely to see a long-term career at their current company.
2. Keep meaningful rewards available
Keeping meaningful rewards available helps organizations avoid creating a preventable reason for employees to leave. Review reward use, redemption rates, and employee feedback before reducing the rewards budget. Offer options at different values so employees can select rewards that are useful and relevant to them.
According to research from Achievers’ 2026 State of Recognition Report, 75% of employees say removing rewards would influence their decision to leave. Any short-term savings from reducing rewards should therefore be weighed against the cost of replacing employees who may view that change as a reason to exit.
3. Give managers a repeatable coaching structure
Giving managers a repeatable coaching structure helps them provide clear, useful feedback more consistently. Use a simple format for each coaching conversation:
- Name the behavior or result
- Explain its effect
- Agree on what should continue or change
- Set a follow-up date
According to the 2026 State of Recognition Report, just 19% of employees receive coaching that helps them perform better. A consistent structure gives employees clearer behavioral cues and makes coaching easier for managers to deliver throughout the year.
4. Require monthly growth conversations
Monthly growth conversations give employees regular opportunities to discuss their career goals and development. Managers should use each conversation to identify one career goal, one skill the employee wants to develop, and one action the manager can support before the next meeting.
In research from AWI’s 2026 State of Recognition Report, employees recognized weekly are 8.6x more likely to feel their manager supports their growth goals.
Recognition should reinforce progress toward those goals by acknowledging skill development, learning milestones, and behaviors that prepare your people for future opportunities.
5. Explain staffing changes before workloads shift
Explaining staffing changes gives employees clear expectations after a colleague leaves the company. Tell the affected team what is changing, which responsibilities will be reassigned, what work can be paused, and when the organization expects to fill the role.
Recognition is a key tool leaders can use to communicate these transitions, with State of Recognition Report data showing employees recognized weekly are 100% more likely to feel informed about change. Recognition can’t replace direct communication, but regular communication and feedback create more opportunities for employees to understand how their work fits into changing priorities.
6. Track the full cost of every departure
Recording your full costs shows where staff turnover creates the greatest financial and operational impact. Keep track of more than recruiting and hiring expenses. Track:
- Days the position remains open
- Recruiting and hiring costs
- Manager hours spent hiring and onboarding
- Overtime and temporary staffing costs
- Time required for the new hire to reach full productivity
- Project delays connected to the vacancy
- Additional departures from the same team
This broader calculation shows whether industry turnover costs are being driven by recruitment spending, long vacancies, slow ramp-up, workload pressure, or repeated departures. Companies can then direct their retention investment toward the areas with the greatest impact.
How did Wesley reduce employee turnover costs?
The challenge
Wesley, a mission-driven non-profit, wanted to create one culture across its nursing departments while improving engagement, retaining top talent, and reducing administrative complexity.
The solution
Wesley partnered with Achievers to introduce Inspire, a social recognition and rewards program that enabled employees to recognize peers, celebrate achievements, nominate coworkers for awards, earn redeemable points, and share feedback through pulse surveys. The program was designed to make recognition part of daily work instead of a manager-only responsibility.
The result
Employee belonging increased from 57.4 to 72.2, and turnover dropped from 67.5% to 34.5% within the first year of the program. That outcome highlights an important point about turnover costs: reducing employee departures is often less expensive than repeatedly replacing employees after they leave.
Let Achievers help you cut turnover costs
Achievers helps organizations keep turnover costs down by integrating frequent, meaningful recognition and rewards across the employee lifecycle. Peer and manager recognition, personalized rewards, employee listening, communications, and connection tools give employees more opportunities to feel valued, heard, and connected while they’re still with the organization.
Every recognition moment captures behavioral data about what work is valued, how employees collaborate, and which behaviors are being reinforced. Achievers uses that workforce intelligence data to surface employees’ skills, strengths, contribution patterns, and collaboration signals, giving managers clearer information about their teams and where to focus their attention. Recognition becomes a way to strengthen retention and a source of workforce intelligence leaders can use to make better people decisions.
Cost of employee turnover FAQs
Key insights
- Most organizations underestimate turnover because they overlook productivity loss, manager time, and knowledge drain.
- The most expensive stage of turnover happens after an employee leaves and before their replacement reaches their full potential.
- Organizations that invest in retention strategies can reduce costs more successfully than those focused solely on recruitment.
While direct turnover costs are easy to measure, larger costs surface after an employee leaves, when productivity declines, workloads increase, and organizational knowledge walks out the door.
Indirect turnover costs are harder to quantify than direct costs, but can have a greater impact because they affect productivity, team performance, and retention long after a replacement is hired.
