How much does employee turnover cost a business?

On the worked example, $157,245.30 a year. A team of 24 with 22% turnover loses 5.28 people annually, and each departure costs $29,781.31: $14,189.00 of recruitment, $7,892.31 of lost output while the replacement comes up to speed, $4,500.00 of knowledge and handover, and $3,200.00 of accrued leave paid out. That is 8.62% of the $1,824,000.00 payroll, spent every year to stand still.

What does one employee leaving cost?

On the worked example, $29,781.31 for someone on $76,000.00, which is 39% of their annual salary. Recruitment at $14,189.00 is the visible half. The ramp-up loss of $7,892.31 comes from twelve weeks at an average 55% productivity, meaning the business pays full salary for 45% less output. Knowledge and handover add $4,500.00 and the accrued leave payout $3,200.00.

What is a normal employee turnover rate in New Zealand?

It varies enormously by sector, so a single benchmark is not much use. Hospitality and retail routinely run well above 30%, professional services and trades considerably lower. The more useful comparison is against your own previous years and against what your particular roles cost to replace. A 22% rate in a business where each departure costs $29,781.31 deserves far more attention than a 35% rate where replacements are quick and cheap.

What would reducing turnover by five percent save?

On the worked example, $35,737.57 a year. Going from 22% to 17% turnover on a team of 24 means 1.2 fewer departures, each costing $29,781.31. A ten point reduction to 12% saves $71,475.14. Those are the figures worth putting next to the cost of whatever retention measure you are considering, because most are considerably cheaper than $35,000 a year.

Is turnover cost the same as the cost of a bad hire?

No, and they should be measured separately. Turnover cost is what it costs when someone competent leaves and is replaced: recruitment, ramp-up, lost knowledge, leave payout. The cost of a bad hire adds the damage done while they were there, including customer harm, rework and the drag on colleagues, and it is typically several times larger. A business with high turnover of good people has a retention problem; one with repeated bad hires has a selection problem.

Why is ramp-up included in turnover cost?

Because the replacement is paid in full from their first day and produces in full considerably later, and that gap is a real cost caused by the departure. On the worked example twelve weeks at an average 55% productivity costs $7,892.31 on a $76,000.00 salary. It is the second largest component and the one most often left out, which is why quoted turnover costs are usually understated.

How do I reduce employee turnover?

Find out why people are actually leaving before spending anything. Exit conversations conducted by someone other than the departing person's manager give better information than a form. Common and fixable causes are a manager rather than the job, pay that has drifted below market for existing staff while new hires are brought in at current rates, and no visible path to anything else. Each has a different remedy, and spending on the wrong one is how retention budgets get wasted.

Should I count turnover cost as a percentage of payroll?

It is a useful way to make the number comparable year to year and across businesses of different sizes. On the worked example 8.62% of payroll goes on replacing people. Presented that way it sits alongside other cost ratios and is harder to dismiss than an absolute figure, particularly when a business is scrutinising much smaller line items elsewhere.

Employee Turnover Cost Calculator NZ 2026/27

Quick answer: On the worked example below, a team of 24 with 22% turnover loses 5.28 people a year. Each departure costs $29,781.31, so turnover costs $157,245.30 annually, which is 8.62% of the $1,824,000.00 payroll. Reducing turnover by five percentage points would save $35,737.57 a year; ten points would save $71,475.14.

An attrition rate is a percentage, and percentages do not get budgets approved. This page converts it into the figure that does. It builds a cost per departure from four components: the recruitment cost of filling the vacancy, the output lost while the replacement comes up to speed, the knowledge and handover time that disappears with the person leaving, and the accrued annual leave paid out on termination. Multiplied by the number of people leaving each year, that gives an annual turnover cost, which the page also expresses as a percentage of payroll so it can be compared with other cost ratios and across years. The ramp-up component is the one businesses most often omit and it is usually the second largest: a replacement is paid in full from their first day and produces in full a great deal later, and the difference is a genuine cost caused by the departure. The most useful output is not the total, though. It is the saving from a five or ten percentage point reduction, because that is an achievable target with a dollar figure attached, and it lets you compare a proposed retention measure against what it would actually be worth rather than against a vague sense that keeping people is good.

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Updated Current 2026/27 rules applied.

Not all turnover is bad, and driving it to zero is not the goal. Some departures are genuinely positive: a poor fit leaving, a role becoming unnecessary, someone moving on after a natural cycle. A business with no turnover at all can be one where nothing changes and no new capability arrives. The figures here measure what replacement costs, not whether a particular departure was unwelcome. Use them to decide how much a retention measure is worth, not to treat every leaver as a loss.

Verification & Methodology

Leavers = headcount × turnover percentage, or the number you enter directly, whichever mode you select.
Ramp-up lost output = ramp weeks × (1 − average productivity) × weekly salary, where weekly salary is annual salary / 52. This prices the shortfall at the employee's own cost, which is the conservative approach. For a billable or revenue-generating role the true loss is higher, since it should be measured against what the person would have earned the business.
Cost per departure = cost per hire + ramp-up lost output + knowledge and handover + leave payout.
Annual turnover cost = leavers × cost per departure. Fractional leavers are kept rather than rounded, since a 22% rate on 24 staff genuinely averages 5.28 people a year over time.
As a share of payroll = annual turnover cost / (headcount × average salary). Payroll here is base salary only, excluding employer KiwiSaver, ACC and ESCT, so the true percentage against fully loaded payroll is slightly lower.
Reduction saving = (current leavers − leavers at the lower rate) × cost per departure, holding the cost per departure constant.
Average salary is used for every departure. If your leavers are concentrated in lower-paid or higher-paid roles, enter the average for the people actually leaving rather than the whole team.
Not employment advice. Last verified: .

Your team Headcount

people

Enter turnover as Annual turnover rate

Or leavers a year

people

Only the field matching your selection above is used. Average salary of leavers

Cost of replacing one person Cost per hire

External plus internal. Our cost per hire calculator gives this figure. Ramp-up period

weeks

Average productivity during ramp

Averaged across the whole period, not the starting point. Lost knowledge and handover

Accrued leave paid out

What improvement is worth First reduction target

points

Second reduction target

points

$157,245.30

annual cost of turnover

Per departure

$29,781.31

39.19% of salary

Leavers a year

5.28

at 22% turnover

Share of payroll

8.62%

spent to stand still

5 point saving

$35,737.57

going to 17%

What one departure costs

Cost per hire, filling the vacancy	$14,189.00
Lost output, 12 weeks at 55% productivity	$7,892.31
Lost knowledge and handover	$4,500.00
Accrued leave paid out	$3,200.00
Cost per departure	$29,781.31
As a share of their annual salary	39.19%

Ramp-up is priced at the employee's own cost, which is conservative. For a billable or sales role, measure it against the revenue they would have generated instead.

What it costs across the year

Headcount	24
Annual turnover rate	22%
People leaving a year	5.28
Cost per departure	$29,781.31
Annual turnover cost	$157,245.30
Total payroll	$1,824,000.00
Turnover cost as a share of payroll	8.62%

What reducing it would be worth

Turnover rate	Leavers	Annual cost	Saved
22% (today)	5.28	$157,245.30	-
17% (down 5 points)	4.08	$121,507.74	$35,737.57
12% (down 10 points)	2.88	$85,770.17	$71,475.14

Put these figures next to the annual cost of whatever retention measure you are weighing. Most are considerably cheaper than the saving.

A Percentage Does Not Get Anything Approved

Most businesses know their turnover rate and very few know what it costs. That is why retention initiatives lose out to things with invoices attached: nobody has put a number on the alternative.

On the worked example the number is $157,245.30 a year, or 8.62% of payroll. Presented that way it sits alongside every other cost ratio in the business, and it is considerably harder to ignore than "our turnover is 22%".

Worked Example: 24 Staff, 22% Turnover

Twenty-four people at 22% turnover means 5.28 departures a year on average. Each one costs $29,781.31, which is 39.19% of the $76,000.00 salary.

That breaks into $14,189.00 of recruitment, $7,892.31 of lost output while the replacement gets up to speed, $4,500.00 of knowledge and handover, and $3,200.00 of accrued leave paid out.

Multiply by 5.28 and the business spends $157,245.30 every year simply maintaining the headcount it already has.

The Ramp-Up Cost Is The Hidden Half

Recruitment is visible because it generates invoices. Ramp-up does not, which is why it is routinely left out of turnover calculations.

A replacement is paid their full salary from day one and reaches full productivity twelve weeks later. Averaging 55% across that period means the business pays for twelve weeks and receives roughly seven, a shortfall of $7,892.31.

That figure is conservative because it values the shortfall at the employee's own cost. For a billable role or a salesperson, the right measure is the revenue they would have generated, which is a multiple of their salary. Our New Hire Ramp-Up Cost Calculator models that properly, including the week the hire turns net positive.

The Number To Act On Is The Reduction

The total is a diagnosis. The figure that changes decisions is what improvement is worth.

Going from 22% to 17% means 1.2 fewer departures and saves $35,737.57 a year. Reaching 12% saves $71,475.14.

Now compare that against what retention actually costs. A salary review to bring existing staff to market, a management training course, better onboarding, or simply exit conversations that produce usable information: almost all of them cost well under $35,000 a year. The arithmetic favours acting, and it favours acting on evidence about why people are leaving rather than on a guess.

Find Out Why Before Spending Anything

The most common mistake is spending on the wrong remedy. Three causes account for a large share of avoidable departures in small businesses, and each needs a different response.

The manager, not the job. People leave managers more often than they leave organisations, and it rarely appears on an exit form completed with that manager in the room.

Pay drift. Existing staff receive modest annual increases while new hires arrive at current market rates. After three years the gap is visible to everyone, and the cheapest way to get a market salary becomes leaving.

No visible path. Not necessarily promotion, which small businesses often cannot offer, but some sense of what changes over the next two years.

Exit conversations run by someone other than the person's direct manager, a month or two after they leave rather than on their final day, produce far more honest answers than a form.

Not All Turnover Is A Problem

Driving turnover to zero is neither achievable nor desirable. Some departures are genuinely good: a poor fit moving on, a role that has become unnecessary, someone leaving after a natural cycle in a business that cannot offer them more.

The distinction worth tracking is between regretted and unregretted departures. If most of the 5.28 people leaving each year are people you would have kept, the $157,245.30 is a genuine loss. If a meaningful share were exits you welcomed, the real cost is lower and the priority shifts from retention to selection, which our Cost of a Bad Hire Calculator addresses.

Our Attrition Rate Calculator handles the percentage side of this if you need to establish the rate first, and our Payroll Cost Calculator gives the fully loaded payroll figure to measure against.

Related NZ Employment Cost Calculators

Attrition Rate Calculator: the percentage this page converts into dollars.
Cost Per Hire Calculator: the largest single component above.
New Hire Ramp-Up Cost Calculator: the ramp period in detail.
Cost of a Bad Hire Calculator: when the departure was welcome but expensive.
Payroll Cost Calculator: fully loaded payroll across the team.

Related calculators

Free Cash Flow Calculator: FCF From OCF and Capex.
FX Fee Tier Break-Even Calculator NZ 2026/27: the annual US share volume where a paid membership with a lower FX rat.
Gross Profit Calculator: Gross Margin Percent NZ.
Gross Profit Margin Calculator: Gross Margin %.

How to calculate the cost of employee turnover

Establish how many people leave each year. Enter headcount and a turnover percentage, or enter the number of leavers directly if you know it. Both routes produce the same answer.
Bring in your cost per hire. Everything spent filling the vacancy, external and internal. This is the most visible component and usually not the largest.
Price the ramp-up period. A replacement is paid in full from day one and productive in full considerably later. Enter the ramp period in weeks and the average productivity across it, and the calculator prices the shortfall.
Add the knowledge that leaves. Handover time, undocumented process, customer relationships and the questions colleagues can no longer ask. Estimate it rather than omitting it.
Include the leave payout. Accrued annual leave is paid out on termination. It is a real cash cost triggered by the departure even though it was earned beforehand.
Read the reduction saving, not the total. The total is a diagnosis. The figure that changes behaviour is what five or ten percentage points of improvement is worth, because that is an achievable target rather than an abstract number.