The Cost of Turnover

Mar 14, 2024

By Steve Smith, InnoSource Chief Financial Officer

Employee turnover is a natural part of any labor force. People come and people go. They might have different reasons for departing, but turnover is simply part of the organic progression of each individual career. As hard it is to see people go — especially the good people — it is to be expected. And as research shows, the generations coming behind Generation X and Baby Boomers are more likely than their older counterparts to seek new opportunities. With the up-and-coming generations, turnover should be expected, and expected more frequently than ever before.

That means companies need to think critically about how they manage turnover and cover the costs associated with it.

For example, a recent study by Career Builder shows Baby Boomers spend an average of eight years and three months in a single job. That’s a sharp contrast to both Millennials and Gen-Zers who average fewer than three years.

Turnover can be costly to a business. On-boarding new employees costs time and money. When employees leave for new opportunities, additional workload and the loss of a day-to-day professional relationship can be a blow to a team’s morale.

Significant resources go into recruiting and eventually hiring an individual. Between the marketing of a job opening and the time spent by a team of recruiters, finding the right person isn’t cheap. There’s a front-end investment that companies make in individuals that includes recruitment costs and training resources before the person can reach full productivity and start generating profit for their employer. If a new hire decides to leave before they hit that period of productivity, the company can face a heavy financial burden.

A Gallup survey estimates that replacing an individual employee can range from 50-200% of their annual salary. And it can be especially costly if the person leaves the company early on in their tenure.

It’s one of the ways a strategic staffing partner like InnoSource can help businesses succeed. Our recruiters work hard to find the right fits for our clients’ job vacancies — not just someone who will accept a job, but someone who fits an organization’s culture and is invested in its mission. This means conducting extra research, asking difficult questions and acting on our intuitions.

Some strategic staffing companies, including ours, provide contract staffing, which is another way for companies to mitigate the costs of turnover. Through contract staffing, InnoSource takes on the financial risk that comes with recruiting and hiring new people. A new hire works for the client company, but InnoSource takes on the costs of on-boarding, HR and other administrative functions. That gives both client and employee a chance to see if the person is a good fit for the job. If they are, the person moves to the client company’s books. If they are not, the cost is ours to bear.

New hires often leave very early in their tenure. A LinkedIn study showed that 33% of new employees quit within six months of being hired. In some ways, finding the right new employee can be luck of the draw, especially for companies that don’t have to make new hires often. But at InnoSource, hiring the right people is what we do. We like to think we forge our own fortune through a proven process, and a team of expert recruiters who are dedicated to help our clients find staffing solutions that stick.