How Much Is It Costing Your Business When You Lose Employees?

Compensating employees. Giving them a raise. Providing health care insurance. Offering vacation leaves. These are not “nice” things companies do for their employees. Companies do this to retain employees and create a more positive working environment. Retaining employees isn’t just about maintaining a stable workforce. It’s about saving on the cost of hiring a new one, too.

Case studies showed that on average, a business has to spend one-fifth of an employer’s annual salary to replace that worker. This means if the employee who resigned from the job earned $48,000 a year, the company will lose $9,600 over the course of looking for a replacement. While this might not cost much once, it can triple and quadruple when you keep on losing employees.

What Are the Costs Associated with Losing an Employee?

Aside from having to pay a severance package if the employee was unwilling to leave the job in the first place, you also have to pay them for the remaining weeks that they worked for you. And once that is over, you also have to deal with paying for HR solutions to find you a new employee. This is when it gets costly for your business.

While you lost one employee, your other workers also lost a colleague. This can result in low morale among your current workforce. If you fired the employee because of work reason, some of your other workers may take that employee’s side as a show of camaraderie. Even if they are not vocal about it, this will affect their relationship with you.

Losing a colleague also means someone has to step up and do the job left by that employee. This can lead to a loss in productivity and efficiency. Because they are taking on more roles, they could be doing things half-baked. When this happens, your employees have to sacrifice not only their time but the quality of their work, too.

What does this mean for the company? When employees have too much on their plate, they are both unproductive and unhappy. They are unsatisfied with their jobs. As a result, that one employee you lost could result in another one resigning because of the burden of shouldering too many responsibilities. Not only that, but this will also reflect on the work they do, too.

It affects the products and the customers’ satisfaction with your products. They will lose trust in your company because of the sub-standard quality of products and delayed services. The possible loss of sales will impact your business and your brand’s reputation.

Regular vs. Executive


More than 40% of jobs in the United States earn less than $50,000 a year. Companies have to spend 20% of the $50,000 the employee earns annually to replace that said employee. For lower-paying jobs—those in the $30,000 range—companies spend at least 16% of the annual salary. Although that’s lower than the 20% companies have to spend on those in the $50,000 range, that will still add up if you keep losing employees.

The problem, however, is in the executive positions. When companies lose employees in the executive position, the cost can be astronomical. The company may have to lose or spend more than 213% of the employee’s annual salary. It takes longer to find someone with the same capabilities as the executive you lose.

What Should Companies Do?

The concept of retaining employees hinges on how the company treats them. Employee demands are so practical that it’s a wonder many companies cannot provide these to them. Employees want sick days, vacation leaves, a little flexibility on time, retirement options, and proper health insurance. These things can help a company retain its employees.

In general, employee retention is on a high. After the Great Recession, there was a sharp increase in the share of workers involuntarily leaving their jobs. There was also a decrease in the number of people who want to quit their jobs. Which industries are culprits for letting go of employees?

The government is among the lowest, both in the share of workers let go of annually and the share of workers quitting positions every year. The industry that usually sees a sharp incline in the number of people who left is the construction industry. Professional and business services follow as a close second. Unsurprisingly, accommodation, food services, and retail have high employee turnover due to employees quitting their jobs.

There is no perfect company. That doesn’t exist. Many times, employees will feel that they are unappreciated. But it doesn’t hurt for companies to at least try to make the workers feel valued. If you cannot do it for them, at least do it for your business.

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