<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=321450106792005&amp;ev=PageView&amp;noscript=1">
Our products
Our capabilities

6 min read

The True Cost of High Employee Turnover Rate:(And How to Reduce It)

Ajay Ruhela

Last Updated: 23 March 2023

In this article:

Employee turnover can be costly and disruptive for businesses of all sizes. High turnover rates can lead to a loss of institutional knowledge, decreased productivity, and increased recruitment and training costs. Amber’s data reveals that in 2022, for every 100 at-risk cases that weren’t acted on, 60 resulted in an exit within 6 months. In addition, more than 50% of the employees who quit were between 0-1 years tenure.

On the other hand, a low employee turnover can have numerous benefits for companies, such as a more stable workforce, improved employee morale, and higher levels of customer satisfaction. 

In this topic, we will explore the bottom-line benefits of a low turnover rate and provide practical advice for building a loyal and dedicated team.

What is Employee Turnover?

Employee turnover is the percentage of employees who leave a company within a given period of time. It is typically calculated on an annual basis. There are many reasons why employees might leave a company, including:

  • Job dissatisfaction: This could be due to a number of factors, such as low pay, lack of benefits, or a toxic work environment.
  • Lack of career development opportunities: Employees who feel like they are not growing in their careers are more likely to leave for other opportunities.
  • Work-life balance issues: If employees feel like they are working too much or that their personal lives are suffering, they may be more likely to leave.

How to calculate employee turnover rate?

Let's say that a company has 100 employees at the beginning of the year and 10 employees leave the company during the year. The company also hires 15 new employees during the year. It can be calculated as follows:

Employee turnover rate = (Number of employees who leave the company / Average number of employees) x 100%

In this example, the average number of employees would be (100 + 115) / 2 = 107.5. So, the turnover rate would be:

Employee turnover rate = (10 / 107.5) x 100% = 9.3%

This means that 9.3% of the company's employees left the company during the year.

Why does employee turnover matter?

It takes a lot of effort in the form of time and money to recruit, hire, and train new employees, and thus it is a very costly process. It can also disrupt the company's operations and lead to a loss of productivity.

Maintaining a stable workforce with a low turnover rate can have significant benefits for businesses, including improved performance, increased profitability, and a competitive edge. Investing in employee retention is essential in today's job market, where turnover rates are high and recruiting and training costs can be expensive. 

By building a loyal and dedicated team, companies can create a positive work culture, improve employee satisfaction, and reduce the negative impact of turnover on productivity and morale. 

The negative impact of high employee turnover

High employee turnover can have several negative consequences such as:-

1. Impact on business profitability

Average cost to hire a new employee is $4,700 and the average cost of training an employee per year is $1700. 

Let's say a company has 100 employees and a turnover rate of 20%. This means that the company will lose 20 employees per year and will need to hire 20 new employees to replace them.

The cost of hiring and training these new employees would be $4,700 * 20 + $1,700 * 20 * 20 = $174,000.

High turnover rates can negatively impact business profitability by increasing recruitment and training costs, reducing productivity, leading to lower quality of work, and damaging the company's reputation. 

2. Low employee morale

Overworked employees with a higher workload, burnout more quickly. They also experience lower motivation and adversely affect workplace morale. Additionally, a high employee turnover can create a sense of instability in the workplace, making it difficult for employees to feel comfortable and develop a sense of belonging. This can lead to lower job satisfaction, decreased motivation, and ultimately, decreased productivity.

3. Reduced marketing ROI

Employees retain your existing customers and bring in new ones. Your marketing returns on investment are reduced if you lose employees who keep your customers happy.

4. Sales impact

Employee turnover can lead to a decrease in sales as new employees may not have the same level of knowledge or experience as those who have been with the company for longer.

5. Damaged reputation

High turnover can create a negative perception of a company, which can damage its reputation and result in lost business.

Average turnover rate

The average employee turnover rate varies across industries and can be affected by factors such as job type, company size, and location. 

A high employee turnover rate indicates low job satisfaction and poor hiring techniques. In such a case, you could revisit the salary and employee management policies, clarity in communication, growth opportunities for employees, and other perks given to your workforce. On the other hand, a low turnover rate indicates a stagnant or aging workforce, which takes away your competitive advantage.

Factors affecting the average turnover rate

Multiple factors can lead to a higher employee turnover. 

1. Benefits and compensation

As per Amber’s Exit Survey data, in 2022, 10% of people left their jobs because they were not satisfied with their salary and benefits. This reason ranked in the top 5 for why people left their organization. When employees feel that they are not being fairly compensated for their work, they may become dissatisfied leading to higher turnover rates as employees leave for better-paying jobs.

2. External factors

These are the external factors independent of your enterprise and its employees. For example, market dynamics or big companies who attract your employees but are difficult to compete with.

3. Internal factors

These are aspects connected with your company’s internal strategies, like your HR policies, work environment, or leadership approach.

4. Employee-related factors

There are two types of such factors: voluntary and involuntary.

Voluntary turnover occurs when employees leave on their own accord due to health concerns, family issues, workplace flexibility, or work-life balance requirements. As per Amber data, in 2022, 23.9% of employees left that left an organization in the first year of employment cited work-life balance as the main cause. Involuntary turnover occurs when the employee is asked to leave against their wish.

Employee turnover rate by industry

Industries with the highest turnover rate

Professional services (13.4%), technology and media (12.9%), entertainment and accommodation (with an 11.8% turnover rate each), and retail (11.4%) are the industries with the highest turnover rates.

Industries with the lowest turnover rate

Government administration (8.4%), construction (9.2%), real estate, transportation, and manufacturing, with a 9.3% rate each, are the industries enjoying the lowest turnovers.

Factors contributing to turnover rates across industries 


This industry poses several challenges for its employees and thus has a high employee churn rate. In fact, healthcare may have replaced 100.5% of its complete workforce in the last five years. The top causes of turnover in healthcare include:

  • Long working hours
  • Inadequate compensation
  • Suffocating supervision and management
  • Excessive workload
  • Lack of recognition and appreciation

IT- SaaS

The industry suffers from one of the highest turnover rates, which is approximately 13%. The primary causes include:

  • Increased demand for such talent
  • Rising levels of competitive compensation
  • Basic requirement for flexible working hours or remote working options
  • Difficult to check all the boxes of tech specialists’ demands 


Most companies in the banking and financial services domain face a high turnover due to:

  • High competition
  • Unhealthy work environment
  • High stress and burnout
  • Poor compensation
  • Fewer opportunities for career progression
  • Lack of innovation in banking products


The biggest reason for employee turnover in the retail industry is the indispensable customer-facing profile. Then there are other reasons like

  • Difficulty in conforming to store policies in a high turnover environment
  • Inconsistent store execution and employee productivity
  • Tough working conditions
  • Store relocations
  • Inadequate pay packages

Strategies for reducing employee turnover

1. Improve onboarding and training programs

The first obvious step to reducing high turnover is hiring the right people who can best fit your organization. Ensure the job descriptions are clear and fitting and adequate training is provided. The new employees should know their roles and expectations and how their work contributes to daily business functioning.

2. Offer competitive compensation and benefits

Compensating your employees for their labor is critical to ensure they don’t leave for greener pastures. It is one of the basic reasons for employees quitting. Adequate compensation and benefits indicate that you value their efforts and hard work.

3. Foster a positive work culture

This can be done through prioritizing work-life balance, offering remote work opportunities or flexible timing, creating a stress-free or low-burnout work environment, or enhancing employee management techniques. Ultimately, you can look for options to improve employee experience and their happiness quotient to reduce turnover.

4. Provide career development opportunities

You can encourage your employees to stay by providing them with ample growth opportunities. For example, organizing training sessions, funding their higher education, or offering online upskilling courses at discounted rates can get you brownie points.

To know the effect of these strategies, you will need to measure their impact. Here’s how you can do that.

How to measure the effectiveness of employee turnover reduction strategies?

There are three steps to measure the effectiveness of your turnover reduction initiatives.

1. Set measurable goals

The right set of KPIs can tell you how you fared on the turnover test. Set goals for the average employee lifecycle, new hire retention scores, department-wise turnover rates, voluntary and involuntary turnover rates, top performer turnover rates, and even job satisfaction and employee happiness scores to map the effectiveness of your initiatives.

2. Collect and analyze data

Use surveys, interviews, focus groups, and other data collection methods to gather information from current and former employees about their experiences with the organization, their reasons for leaving, and their perceptions of the effectiveness of the turnover reduction strategies.

3. Track and adjust strategies

Use statistical analysis and other tools to analyze the data and identify patterns, trends, and correlations. Look for areas where the organization is doing well and where improvements can be made. Compare results against goals and benchmarks. 

Compare the results of the analysis against the goals and benchmarks set earlier to determine whether the turnover reduction strategies are effective. If the goals and benchmarks are not being met, identify the reasons and make adjustments to the strategies as needed.

Happy employees = Productive workplaces

As a people manager, you know that one of the biggest headaches you can face is staff turnover. It's like a game of musical chairs, but instead of just losing a seat, you lose a valuable employee. And that loss can be costly - not just in terms of recruitment and training, but in lost productivity, morale, and even reputation.

So, if you're looking to build a successful people strategy that can stand the test of time, it's time to pay attention to your employees and make sure they're in it for the long haul. Because as they say, "if you take care of your employees, they'll take care of your business."

Start your journey to people-led change in your enterprise today

You may opt-out at any time. Privacy Policy


Get the latest on Amber & inFeedo right in your inbox!

You may opt-out at any time. Privacy Policy