How expensive is employee turnover? How can we measure its real impact?
Employee turnover is n’t just about the departure of one employee and the arrival of another. It actually has a hidden cost that directly impacts profitability, organizational culture, and work environment. But do you know how much losing an employee really costs you?
In this article, we explain how to calculate the true cost of employee turnover , its most common effects, and what strategies you can implement to reduce it
What is staff turnover?
Employee turnover refers to the voluntary or involuntary departure of employees within an organization. It can be due to resignations, dismissals, promotions, changes in department, or retirement.
There are two main types:
- Voluntary turnover: When the employee decides to leave.
- Involuntary turnover: When the company decides to terminate the employment relationship.
Why is turnover costly?
Rotation involves much more than filling a vacancy. The entire process involves:
- Recruitment and selection
- Training and onboarding
- Loss of productivity
- Liquidation costs
- Extra load for the remaining equipment
- Damage to culture and work environment
According to Open English , replacing an employee can cost between 50% and 200% of their annual salary , depending on the level of the position.
How to calculate the cost of staff turnover?
Here’s a basic formula for estimating cost per turnover:
1. Exit costs
They include severance pay, compensation, administrative and legal time.
2. Replacement costs
Vacancy postings, interview times, psychometric tests, etc.
3. Training costs
Time and resources invested in training the new employee.
4. Loss of productivity
It takes between 3 and 6 months for the new collaborator to reach the level of the previous one.
A study by the Madrid Chamber of Commerce estimates that replacing an administrative employee costs $4,129 USD on average and can take 42 days.
Quick formula to estimate the economic impact: txt Copy Edit
For example, if you lose 10 employees and each departure costs $30,000 MXN, your annual turnover cost would be $300,000 MXN.
Which sectors suffer most from turnover?
In Mexico, the sectors with the highest turnover according to INEGI and IMSS data include:
- Retail and sales
- Call centers
- Construction
- Technology (although with high salaries, there is a lot of mobility)
The average turnover rate in Mexico is around 17.3% annually , but in some industries it can exceed 40% .
Strategies to reduce turnover
- Improve your recruiting process : Hire for values, not just skills.
- Offers real growth : Career plans and ongoing training.
- Strengthens organizational culture : A sense of belonging retains talent.
- Conduct work climate surveys : Listen before losing talent.
- Review your benefits and emotional salary : Not everything is money, but it does count
Conclusion:
Employee turnover isn’t just a human resources issue; it’s a financial and strategic challenge . Measuring its impact is the first step toward containing it. Implementing preventative measures and improving employee experience can save your company thousands of pesos a year .
Is your company already measuring the cost of turnover?
At Global Touch , we help growing companies design retention strategies and improve their hiring processes with data and legal insight