Employees are the foundation of a successful company. They contribute to the productivity and overall revenue, so when they leave, it can damage the business altogether. So, the costs of employee attrition manifest in different ways:
A significant investment is required to acquire a replacement with the same skills and experience as the employee that left. It is imperative to spend extra time and effort searching for the most qualified talent through various channels. According to the Center for American Progress, the actual cost of employee attrition depends on the position and wage level. The approximate expenses to replace them are listed below:
|Job Level||Annual Salary/Wage||Percentage of Attrition Cost|
|Entry Level||Less than $30,000||16% of annual salary|
|Experienced||$30,000 to $50,000||20% of annual salary|
|Executive Level||$100,000||213% of annual salary|
Reducing Employee Productivity
When an employee leaves the company, their position becomes vacant, directly contributing to a loss in productivity. It takes weeks or even months to replace these employees. On top of this, a new hire or even a temp goes through a learning curve before they can become as productive as the employee that left. They need time to get used to the responsibilities and understand the company goals. Thus, the employees left behind have no choice but to take over these responsibilities in the meantime. This burden of these tasks influences the overall performance of the team.
Employees who decide to leave may try to persuade their colleagues to take the same path, which causes the domino effect. It may be for a better opportunity elsewhere or to start a new venture with them. Either way, this loss can significantly damage the company bringing it to its knees.
Increased Training and Recruiting Costs
As mentioned, it takes investment to acquire the best replacement to maintain performance. This investment is primarily for the training and recruiting process. Management needs to delegate the tasks left behind, including the training for the new hires. As a result, workload productivity is affected since the rest of your staff becomes overwhelmed with work. Thus, it can cost even more when the performance of your existing employees are immensely affected. Furthermore, the best way to reduce these stringent expenses is to extend efforts in increasing employee satisfaction.
Setting Replacement Salary
Executive and experienced employees are difficult to find in the labor market. Oftentimes, there is also no one from the internal team to promote. As a result, many companies increase the salary they offer from somewhere between 10% to 20% higher than the salary of the employee that left. Along with excellent benefits, this can help companies attract the most qualified talent possible. However, it does inflate costs.