The Payroll Blog

News, tips, and advice for small business owners

What's the Cost of Losing an Employee?

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Chris Bibey

There is no better feeling than bringing a new employee into your company. You’re positive that he or she will have a huge impact on productivity, efficiency, and of course, your bottom line.

An employee in an office holding a brown box of their belongings with some additional office equipment on top of the box.

But then something happens. Out of nowhere (or maybe you see it coming), the person puts in their two-week notice, and that is that.

While you are likely aware of the costs associated with hiring, onboarding, and growing your business, you may never consider the cost of losing an employee and the impact it can have on your small business.

Here are some of the many reasons to focus more time and energy on retention:

  • Cost. The cost of hiring a new employee is expensive, with one study from the Society for Human Resource Management (SHRM) setting this number at more than $4,000 per hire.
  • Lost productivity. It’s easy to focus on the cost of hiring a replacement, but you must also consider the productivity loss associated with a person leaving the company. According to the same SHRM study, 42 days is the average time it takes to fill a position. With being down a person, how much work will be neglected? Will this have a negative impact on performance and your bottom line?
  • An uptick in mistakes. Tying into productivity, when an employee leaves a company, his or her tasks are often passed onto another worker until a replacement is hired. Even if this person is doing their best to keep up, an uptick in mistakes is likely. Try to set up a transition plan and work with the employee picking up the slack closely so you can be there to answer any questions they have and hopefully reduce any mistakes made.
  • Cultural change. When somebody decides to leave a company, it tends to spark conversation among remaining employees. Chances are your employees will wonder why the person left, and rumors can swirl quickly. Will the employee badmouth the company on the way out the door? Could this lead to a cultural change that drags down the business as a whole? Having an exit interview with the employee leaving could be a good way to control any potential cultural shifts.
  • Follow the leader. Sometimes, if one employee leaves the company others are more likely to look into their options. Soon enough, you could find yourself needing to hire multiple employees, not just a single replacement. To prevent this, check employee engagement frequently and communicate with your employees. Opening that line of communication early and continuously can prevent people from wanting to leave.

Bottom Line

In a perfect world, every person you hire would stay with your company for the duration of their career.

However, in the real world, this doesn’t always happen. Some people get bored with their job. Some people don’t like their coworkers. And of course, some people love everything about their employment but are forced to leave as the result of relocation, health, or something else out of their control.

With the cost of losing an employee so high, it’s critical to implement a retention strategy you can trust and rely on to prevent a revolving door of employees.

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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.