Accountability, Interrupted
May 8, 2025
April 29th, 2025 – SkillCycle
Losing employees is tough on your company’s bottom line—the cost of employee attrition quickly adds up in lost productivity, recruiting fees, and onboarding time. Most CEOs would agree, yet few can state the average cost of employee attrition or pin down the cost of attrition per employee with confidence. The numbers are startling. Attrition isn’t a new problem, but when Gallup dubbed voluntary turnover “the $1 trillion dollar fixable problem” back in 2019, leaders finally started calculating the cost of employee attrition and disengagement more seriously. If you can slow your attrition rate, you stand a good chance of cutting expenses—and creating a workplace people want to stay in.
The problem isn’t going away, either. In 2021, 40 % of employees said they were somewhat likely to leave their jobs within three to six months, according to McKinsey, and that sentiment barely shifted a year later. If you haven’t yet asked, “What is the cost of employee attrition in my company?” now’s the time to run the numbers.
Employee attrition is the gradual loss of employees through resignations, retirements, or long-term absences that you don’t immediately replace. Unlike short-term churn, attrition signals deeper issues—skills mismatches, disengagement, or a culture failing to keep pace with employee expectations.
Why care in 2025? Because talent markets remain tight. PwC’s Global Workforce survey shows 52 % of workers still feel financially stressed, and many won’t hesitate to jump for a better deal. PwC For employers, every exit drives up labour costs, drags down innovation, and chips away at customer experience. Attrition is no longer an HR line item; it’s a strategic threat.
Diagnosing which of these pain points drives turnover in your firm is half the battle.
The true financial impact of attrition isn’t clear in every organization, especially if they don’t have systems in place to track the full range of costs that add up.
Some estimates say replacing people who leave your company costs one-half to two times their annual salary (in other words, six months to two years of their salary), according to Gallup. If the average salary in your organization is $50,000, you could be spending between $25,000 and $100,000 for every employee who quits.
Multiply that by just ten employees quitting in a year, and the annual costs to the company could be anywhere from $250,000 to $1 million. Add these costs to what it takes to compete in a tight labor market, and most companies can’t financially survive the loss of good people.
These estimates are reason enough to adopt a proactive approach to managing attrition. But there’s more to these calculations than just hiring and administration expenses.
Direct and indirect costs of employee attrition
Some costs tend to be more easily measured and attributed to attrition, but that’s not where the story ends. Costs can ripple out from employee turnover, affecting multiple departments and levels of your company.
Let’s look at some of the costs associated with employee turnover:
These are clearly related to the HR functions of addressing employee turnover. These include tangible costs such as recruitment, hiring, onboarding, and training new employees. Direct attrition costs also need to account for the administrative expenses of resignations and exit interviews.
Other related costs can include lost business, loss of institutional knowledge and expertise, and lowered productivity while a new employee gets up to speed. Losing team members can mean losing investments in client relationships and potential customer dissatisfaction. New hires may need to be managed more closely, requiring more time investment from those they report to.
Let’s not forget what can happen on a team when one or more people decide to quit. It can be a blow to remaining employees to lose connection and relationships, causing lower engagement and morale among remaining team members who are sure to ask what motivated people to leave the company.
Ready for some good news? However impactful the costs of attrition are, so too are the savings when a company can slow its rate.
If attrition costs your organization $100,000 annually, and you can reduce that rate by 10%, you’ll save $10,000 each year. Multiple that by five years, and you’ll see the significant impact of addressing your attrition rate head on.
Employees want to stay in workplaces where they feel valued and can see opportunities to grow. Here are eight strategies to help reduce attrition and keep people in your company.
Carefully expanding your team by identifying and filling skills gaps will ensure you hire proactively, increasing the chance employees will stay.
Stay attuned to what your employees want for benefits and work structures to ensure you meet their needs and aren’t offering superficial perks they don’t value.
Work with your employees to develop goals that help drive positive outcomes for them and the company, then empower them to meet them.
Create opportunities to meet with employees to discuss their work, current challenges, and what they need to be successful in their roles.
Commit to offering learning opportunities throughout your employees’ careers based on their interests and goals, so your people can always see how they can grow and evolve.
Get better at spotting who on your team can fill skills gaps, so you can offer the opportunity for them to gain vital skills and strengthen your organization for the future.
Connect people’s work to the company’s purpose and mission. Your employees should understand why their work matters and how it contributes.
Nurture a positive environment that offers employees a safe, inclusive space to learn, challenge themselves, and build their talents over time.
Think of attrition math as a layered cake—every slice is an expense you’ll feel in next quarter’s P&L. Here’s a deeper look at each layer so finance, HR, and line managers can all speak the same language.
Cost Layer | What It Covers | How to Find the Number |
Direct Replacement Costs | Recruiter or agency fees, job-board ads, background checks, signing bonus, relocation stipend | Pull from recent invoices or ATS reports; most ATS platforms tag these costs per requisition |
Lost Productivity | The “empty seat” days before back-fill + ramp-up period at partial output | Calculate average daily salary and multiply by days at <100 % productivity (often 60-90 days) |
Manager Time | Hours spent screening resumes, interviewing, onboarding, and coaching | Track via calendar invites or estimate with a time log—then apply the manager’s loaded daily rate |
Training Costs | Formal classroom sessions, e-learning licences, buddy time | LMS or L&D budgets show price per learner; add any internal trainer hours × hourly rate |
Lost Revenue / Customer Impact | Deals that slipped, support tickets unresolved, project delays | Use historical sales or ticket-resolution data to estimate average value lost during vacancy |
A quick, CFO-friendly formula:
Attrition Cost per Employee = Direct Replacement Costs + (Lost Productivity Days × Daily Salary) + (Manager Time × Manager Daily Rate) + (Training Days × Trainee Daily Rate) + (Estimated Lost Revenue or Customer Impact) |
Let’s say we lose an $80 k salesperson:
Grand Total: $47 k—about 59 % of annual salary, perfectly aligned with SHRM’s “50 %–200 %” benchmark.
For annual budgeting, multiply your per-head cost by total voluntary exits, then tack on overhead:
Annual Attrition Cost =
Σ (Attrition Cost per Employee) + (Benefits Load × # of Exits)
Quick rule of thumb: U.S. Bureau of Labor Statistics pegs benefits at ~38 % of salary, so that $47 k true cost can easily climb past $65 k once healthcare, retirement match, and payroll taxes are added.
Hidden Costs Most Teams Miss
Capturing these “soft” losses isn’t easy, but pulse surveys and customer NPS dips can offer proxy metrics.
By spelling out each dollar lost, you’ll arm execs with data that justifies stronger retention programs—and moves “people problems” from gut feel to hard-cost urgency.
Losing talented employees can be an expensive problem, but this isn’t just a financial concern. It’s also imperative for organizations to recognize that better employee retention creates a stronger company overall.
The benefits of retaining your employees can be seen in every business area, from increased productivity and profitability to improved morale. You’ll also boost your brand reputation and be able to attract new talent when needed.
With a strategic approach to keeping and developing your people, you’ll create a highly skilled and cohesive team with robust knowledge, deep expertise, and a solid commitment to the company’s mission.
When HR and people ops are adequately equipped with resources and systems that support proactive retention strategies, they can go beyond addressing performance issues and hiring. Instead, they can identify challenges and deliver strategies to help mitigate the cost of employee attrition and build a stronger company from the bottom up.
Ready for a solution that helps you achieve your definition of success? Book a demo to learn how SkillCycle’s people success operating system can meet your needs.
The typical cost of employee attrition across industries runs between roughly 50 % and 200 % of the departed worker’s annual pay, with the higher end applying to complex or executive roles.
To calculate attrition cost, add direct replacement expenses (recruiting, advertising, signing costs), onboarding and training outlays, lost productivity while the role is vacant and during ramp-up, manager oversight time, plus any interim overtime or contractor fees.
Yes, in many situations. Work Institute research puts the average replacement expense at about 33 % of a U.S. employee’s base salary—roughly $15,000 for a $45,000 position.
Beyond obvious hiring bills, attrition erodes institutional knowledge, strains customer relationships, dampens team morale, and can stall strategic projects—costs that rarely show up as single line items but weigh heavily on performance.
Employee disengagement inflates attrition costs because disengaged staff both under-perform and quit more often. Gallup estimates disengagement already drains $8.8 trillion in global productivity, amplifying the financial hit each time a trained worker walks out.
Absolutely. Gallup’s meta-analysis shows teams with high engagement and lower turnover deliver 23 % higher profitability than low-engagement peers, while also cutting recruitment spend—together translating to noticeably stronger margins over time.
