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The cost of replacing an employee can vary significantly depending on various factors such as the industry, job role, level of the employee, and the specific circumstances surrounding their departure. However, numerous studies and estimates have attempted to calculate the average cost of employee turnover in the United States. As of September 2021, the estimated average price of replacing an employee was anywhere from 16% to 20% of the employee's annual salary.
This cost includes direct expenses like recruitment, advertising, interviewing, onboarding, and training new employees, indirect costs associated with lost productivity, decreased morale among remaining employees, and the time it takes for the new employee to reach full productivity.
Keep in mind that these estimates can vary significantly depending on factors such as:
- Industry: Certain industries may have higher turnover rates and higher costs associated with replacing employees due to the specialized skills or knowledge required.
- Job Level: The cost of replacing a higher-level executive or specialized professional could be much higher due to the expertise they bring to the organization.
- Geographic Location: The cost of living and labor market conditions in different regions can impact the cost of employee turnover.
- Company Size: Smaller companies might feel the impact of turnover more acutely than larger organizations.
- Turnover Reason: The reason for an employee's departure can also impact costs. For example, voluntary resignations lead to higher costs than planned retirements.
- The Efficiency of Recruitment and Onboarding Processes: Companies with well-developed recruitment and onboarding processes may incur lower costs associated with turnover.
- Employee Benefits and Perks: Companies with robust benefits and perks might experience lower turnover costs, as employees may be more inclined to stay.
It's recommended to consult more recent industry reports, HR resources, or consulting firms for the most up-to-date and accurate estimates of employee turnover costs, as these figures can change over time. Additionally, the COVID-19 pandemic, inflation, and other factors have introduced new dynamics to employee turnover and associated costs that could impact these estimates.