Employee Turnover Cost Calculator

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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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.