The real cost of turnover
And how to measure retention rate
Retention Rate = [(Employees at end of period – New starters) ÷ Employees at start of period] × 100
Example:
Start = 120 staff
New hires = 15
End = 110
→ [(110 – 15) ÷ 120] × 100 = 79.2% retention
Administration of resignations
Recruitment and selection costs
Cover during the vacancy period
Induction and training for the new employee
Loss of knowledge and team disruption
People leave organisations for many reasons including:
Lack of career progression
Poor work-life balance
The attraction of a new job
It's important to understand the why, and the impact it's having on your organisation
Turnover should be seen as a performance/success metric
Every resignation comes at a cost
Turnover affects productivity, culture, and your bottom line
Measuring retention helps you make smart, people-first decisions
For jobs paying less than £30,000 per year, it costs 16% of the annual salary to replace a staff member
For jobs paying between £30,000 and £50,000 per year, it’s about 20% of the annual salary
For highly paid executive positions, it can cost up to a whopping 213% of the annual salary
Pinpoints problem areas (e.g. poor onboarding, lack of progression)
Tells you how well your culture, leadership, and benefits are working
Helps forecast recruitment needs and budget effectively
If churn is too high → Disruption, cost, low morale.
If churn is too low? → Risk of stagnation, missed innovation.
What is classified as a healthy rate is dependent on things such as industry and size of organisation.
But some churn is necessary to:
Bring Fresh Perspectives
Build stronger, more diverse teams
Show overall signs of growth and progress for your organisation
