The simple formula
Conservative turnover cost = people who left x average salary x 0.33
The 33% figure comes from the Work Institute, 2025 Retention Report, which describes it as a conservative estimate: a $50,000 employee costs at least $16,500 to replace. For a high range, Gallup (2019) estimates one half to two times annual salary once you count lost productivity and the time of the people who cover the gap.
A worked example
| Input | Value |
|---|---|
| Headcount | 50 |
| People who left last year | 12 |
| Average salary | $45,000 |
| Conservative cost (12 x $45,000 x 0.33) | $178,200 |
| High range (12 x $45,000 x 0.5 to 2.0) | $270,000 to $1,080,000 |
| Preventable share (Work Institute: 76.3%) | About $136,000 of the conservative figure |
What goes into the cost
- Hiring: job ads, recruiter time, interviews and background checks.
- Onboarding and training: the new hire's time and the trainer's time.
- Lost productivity: the open seat, then a new hire working below full speed for months.
- Coverage: overtime and the strain on the people filling the gap.
- Quality and customers: mistakes, slower service and lost relationships.
Benchmarks worth knowing
- As much as 40% of turnover happens in the first year (Work Institute, 2025).
- 76.3% of exits in the 2024 data were preventable (same source).
- 52% of people who quit said their manager or company could have done something to keep them (Gallup, 2019).
- Average cost per hire was nearly $4,700 (SHRM, 2022).
- Voluntary turnover costs US businesses $1 trillion a year (Gallup, 2019).
How to calculate your turnover rate
Annual turnover rate = people who left in the year / average headcount for the year x 100. Average headcount is usually the headcount at the start plus the headcount at the end, divided by two. Track new hire turnover separately: people who leave within 90 days or within the first year. That number usually points straight at onboarding.
What to do with the number
A turnover cost figure is most useful when it starts a decision. Compare it with what it would cost to fix onboarding, role clarity and manager routines. Then pick the role or team where turnover is highest and start there. See how to fix high turnover.
Questions owners ask
How much does it cost to replace an employee?
At least 33% of base pay per exit (Work Institute) and one half to two times annual salary (Gallup, 2019).
How do you calculate employee turnover cost?
People who left x average salary x 0.33 for a conservative figure. Use 0.5 to 2.0 for a high range.
What is a good turnover rate?
It depends on the industry. BLS JOLTS data shows quits rates vary widely by sector, from about 1% to over 4% a month.
How much turnover is preventable?
Work Institute found 76.3% of exits in its 2024 data were preventable.
