{"id":43,"date":"2026-07-28T12:27:20","date_gmt":"2026-07-28T12:27:20","guid":{"rendered":"https:\/\/smallhrtools.com\/blog\/?p=43"},"modified":"2026-08-02T22:23:12","modified_gmt":"2026-08-02T22:23:12","slug":"real-cost-of-employee-turnover-worked-model","status":"publish","type":"post","link":"https:\/\/smallhrtools.com\/blog\/real-cost-of-employee-turnover-worked-model\/","title":{"rendered":"The Real Cost of Employee Turnover: A Worked Model for a 40-Person Company"},"content":{"rendered":"\n

Short answer:<\/strong> replacing one employee typically costs 50-60% of their annual salary in direct costs<\/strong>, and 90-200% in total costs<\/strong> once you count lost productivity, ramp-up time, and the load on the rest of the team (SHRM). For a 40-person company paying an average of $65,000 with 15% annual turnover, that is six departures and roughly $390,000-$585,000 a year<\/strong> – the size of an entire department payroll, hiding in plain sight.<\/p>\n\n\n\n

Why turnover cost feels invisible<\/h2>\n\n\n\n

No invoice ever arrives that says “employee departure: $78,000.” The cost is smeared across a dozen budget lines – a job-board charge here, a recruiter fee there, three months of a new hire at full salary but half output – so it never gets totalled. Finance sees each fragment as normal operating noise. That is exactly why HR teams that do<\/em> total it suddenly find their retention proposals getting funded.<\/p>\n\n\n\n

The model below splits the cost into four buckets. Work through them once with your own numbers – our Cost Per Hire Calculator<\/a> and Employee Turnover Calculator<\/a> handle the arithmetic.<\/p>\n\n\n\n

The model: one departing employee at $65,000<\/h2>\n\n\n\n

A mid-level employee at a 40-person services company, $65,000 salary (~$250\/working day), giving two weeks notice.<\/p>\n\n\n\n

Bucket 1 – Separation costs (~$3,300)<\/h3>\n\n\n\n
Item<\/th>Estimate<\/th><\/tr><\/thead>
Exit interview, offboarding admin, IT deprovisioning<\/td>$500<\/td><\/tr>
Accrued leave payout (8 days)<\/td>$2,000<\/td><\/tr>
Knowledge-transfer sessions<\/td>$800<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Bucket 2 – Vacancy costs (~$12,500)<\/h3>\n\n\n\n

The role sits empty for the time it takes to fill it – say 50 days (Time to Fill<\/a>). The work does not disappear; it is absorbed badly:<\/p>\n\n\n\n

Item<\/th>Estimate<\/th><\/tr><\/thead>
Lost output of the vacant seat (50% of daily value \u00d7 50 days)<\/td>$6,250<\/td><\/tr>
Overtime\/spillover to teammates (~10% for 3 people)<\/td>$4,500<\/td><\/tr>
Manager time re-planning and covering<\/td>$1,750<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Bucket 3 – Hiring costs (~$9,600)<\/h3>\n\n\n\n
Item<\/th>Estimate<\/th><\/tr><\/thead>
Job boards + LinkedIn ads<\/td>$1,200<\/td><\/tr>
Recruiter\/sourcing time (internal, ~30 hrs)<\/td>$1,500<\/td><\/tr>
Interview time: 5 interviewers \u00d7 4 candidates \u00d7 1.5 hrs<\/td>$2,400<\/td><\/tr>
Screening tools, background check<\/td>$500<\/td><\/tr>
Agency fee amortised (1 in 3 hires)<\/td>$4,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Bucket 4 – Ramp-up costs (~$21,700)<\/h3>\n\n\n\n

A new professional hire takes roughly 3-6 months to reach full productivity:<\/p>\n\n\n\n

Item<\/th>Estimate<\/th><\/tr><\/thead>
Months 1\u20133 at ~50% productivity<\/td>$8,100<\/td><\/tr>
Months 4\u20136 at ~75% productivity<\/td>$4,100<\/td><\/tr>
Trainer\/buddy time (10% of senior colleague)<\/td>$2,400<\/td><\/tr>
Formal training, tools, certifications<\/td>$1,600<\/td><\/tr>
Elevated error\/rework rate during ramp<\/td>$2,500<\/td><\/tr>
Manager 1:1 overhead above steady state<\/td>$3,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

The total<\/h3>\n\n\n\n

$3,300 + $12,500 + $9,600 + $21,700 = $47,100 – about 72% of salary.<\/strong> That lands inside SHRM’s 50-200% band, toward the conservative end: this model assumes a smooth 50-day fill and no client churn.<\/p>\n\n\n\n

Scaling it up: the 40-person company<\/h2>\n\n\n\n

At 15% annual turnover<\/strong>, a 40-person company loses six people a year:<\/p>\n\n\n\n

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6 departures x $47,100 = $283,000\/year<\/strong> (conservative)
6 x 90% of salary = $351,000\/year<\/strong> (SHRM mid-range)<\/p>\n<\/blockquote>\n\n\n\n

Cutting turnover from 15% to 10% (two fewer departures) saves ~$94,000 a year. The Retention Rate Calculator<\/a> shows where you stand.<\/p>\n\n\n\n

Regrettable vs non-regrettable departures<\/h2>\n\n\n\n