People Data & Analytics • 7 MIN READ
How to Calculate the True Cost of Employee Turnover
JUN 6, 2026
Most organisations underestimate turnover cost by counting only recruitment fees. Here is the full calculation and why the number is larger than you think.
The components of turnover cost
The full cost of employee turnover includes: separation costs (HR administration, exit interview time, potential severance), replacement costs (recruitment advertising, agency fees, referral bonuses, interviewer time), onboarding costs (HR and IT administration, buddy and manager time, training materials), and lost productivity costs (the gap between the departing employee's full productivity and the replacement's output during their ramp-up period, plus the additional workload on remaining team members). The lost productivity component is typically the largest and is almost always omitted from turnover cost calculations.
A worked example
For a mid-level professional earning £45,000, a typical full turnover cost breakdown might look like: separation costs £500, recruitment costs £5,000 (agency fee at 11%), onboarding costs £1,500, and lost productivity during a six-month ramp-up estimated at 50% of annual salary, approximately £11,250. Total: approximately £18,250, or 40% of annual salary. For a senior specialist earning £80,000, the equivalent figure often exceeds £50,000. Presenting turnover cost in these terms transforms the business case for retention investment from a qualitative argument to a quantitative one.
