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Calculating the real costs of losing an employee

Losing an employee can be very costly for any company. Employers need to invest time and money in seeking new candidates, interview them, conducting reference checks, writing up job offers, etc. But the real disadvantage does not end here. Frequent, voluntary turnover can negatively impact staff morale, productivity, and the company’s finances. However, when calculating the costs on past employees, it can be rather tricky.

Costs of losing staff

The real amount is often hard to be estimated as companies do not have comprehensive systems to track expenditure collaboratively between departments. What’s more, there are other unaccounted costs such as exit costs, orientation and training, lost productivity, reduced or lost business, administrative costs, lost expertise, etc making the real value of an employee difficult to estimate.

According to Oxford Economics and Income Protection Providers Unum, the average staff turnover costs British businesses at least £4.13bn every year. That puts the average value for replacing a departing staff member at £30,614. These costs breakdown in the following:

  • Hiring - The price of hiring a new employee can be very costly. Processes range from the initial advertising, to interviewing, to screening, and finally to hiring.
  • Onboarding - Once hiring has started, onboarding is usually the next costly step. Welcome sessions, training seminars, and understanding company procedures,  policies and work mechanisms all cost time and money.   
  • Lost time—Once onboarding is complete, it may take the new employee up to an year to reach the existing person’s optimal productivity and efficiency of the role. Lost time is costly.
  • Poor engagement—Usually when company employee turnover is high, other staff  tend to be affected the most and often disengage as a result. Poor engagement costs the company productivity which affect its bottom line.
  • Adaptability—In addition to taking time to build up efficiency in the new role, new employees take longer to adapt to the culture and the team’s working habits.  While this problem is resolved later, the time it takes to adapt and get up to speed costs time and money.
  • Training—Over two to three years, a business is likely invests 10% to 20% of an employee's salary or more in training. However, with high employee turnover, investments like these can be detrimental to the company’s finances. It’s like burning money.

Although the above figure is just an industry value estimate, every company’s employee worth can vary. If you want to get a close estimate of cost, there are many online calculators that can help. I found this one to be very useful.  It requires some data input but it gives you a pretty good estimate of an employee’s real value, and what their lost could cost your business.

Dealing with High Employee Turnover

If you are looking to avoid high turnover rates and/or if you are looking to boost retention and engagement across your company, a well designed and implemented corporate wellness program can help.

Many employers are turning to wellness programs to help control employee benefits costs, rising insurance premiums and help attract and retain top employees. The National Institute for Health and Care Excellence in the UK calculates that a well designed and operated wellness plan can reduce sick days by up to 30%, while producing benefits around staff retention, productivity and reputation.

If your company’s bottom line is impacted drastically because of high employee turnover, maybe it’s time to consider a wellness initiative. Below are some pros and cons on how health and wellness programs could affect your business:

Potential benefits

  • Improved staff health, physical and mental
  • Cuts the direct and indirect costs associated with staff sickness and absence
  • Improves staff loyalty and engagement, reducing hiring and retention costs and improving productivity
  • Boosts corporate reputation and standing among staff, clients and stakeholders
  • Creates a wider good - by helping your staff stay well your business is benefiting society


  • Requires senior management time and ongoing investment
  • It needs to be done properly, ill-considered implementations may be received negatively
  • Results will take time to filter through - a company’s health profile cannot be changed overnight.
Trying a workplace wellness initiative: practical tips

If you are considering going with a wellness program, the first key is to start small. Start with the basics, for example, sedentary behaviour or work related accidents, and work up.

Secondly, be sure to make it sustainable.  Changing a behaviour is one thing, sustaining that change quite different. A common mistake is to launch initiatives that cannot be sustained from a resource, infrastructure or policy perspective. Creating healthy habits is the key.

Thirdly, be consistent and offer incentives. Rewards can be a powerful reinforcer and motivator but need to be structured carefully to avoid unintended consequences. Focus more on recognition than hard financial gain and take care not to create a culture of winners and losers. Celebrating participation is key.

Finally, measure and adjust. It may be hard to determine the immediate health outcomes of a wellness program especially long term conditions  therefore bear that in mind before setting any short to medium term objectives. In the beginning, focus more on staff engagement and participation rates and adjust accordingly. Be willing to abandon pilot projects that fail.

Concluding thoughts

There can be many reasons to staff turnover. Frequent, voluntary turnover can have a negative impact on employee morale, productivity, and your company’s bottom line. If you are facing high employee turnover costs, take a step to transform your workplace by building active, productive and happy employees.

A well executed corporate wellness programme can make a positive difference to your business. Consider incorporating a health and wellness initiative in your business and make your story a success.  

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