Flex Spending Account Administration

The Hidden Cost of Employee Turnover

High employee turnover is something all small businesses would like to avoid. When you mention employee turnover, people immediately think about the financial impact of a constantly revolving door, but the cost of employee turnover goes far beyond just the financial figures.

Low Workplace Morale

When employees see the rest of the staff continually changing, it can lead to poor job performance, dissatisfaction with work and many more negative consequences. In fact, a high turnover rate often leads to even more turnover!

The truth is, employees are happiest when they feel a sense of appreciation, stability, community and comradery, as well as when they feel a sense of pride and ownership in their work. These feelings are all significantly undermined and diminished when coworkers are constantly coming and going. In addition, employees may feel angry, overwhelmed or frustrated if an employee's departure leads to more/new responsibilities for them. They can easily end up feeling overworked and underappreciated.


The cost of employee turnover can be high, especially when you factor in the cost of a severance package and add to that the cost of paying someone to find and recruit new employees, review hundreds of applications, interview candidates and then train them. These costs can quickly add up and have a significant impact on a company's bottom line. There are also other expenses to consider due to lower productivity from existing employees and even lost sales.

Company Goals

Another impact of employee turnover is that all of the recruiting, hiring and training can take focus off of key business initiatives. Instead of staff working toward this month's sales goals, they are instead trying to tread water with many extra job responsibilities while management struggles to replace the lost worker.

Clearly there are many costs associated with a high employee turnover rate. Now let's look at a two key ways to retain employees:

1. Employee Recognition

One of the easiest, cheapest and most important ways to retain employees is to recognize them for a job well done. Look for any reason to appreciate and pat your employees on the back. Employee recognition and appreciation is often more useful than pay increases in keeping morale high and turnover low. Why not institute a weekly coffee break where an outstanding employee is recognized for doing something above and beyond? It's so easy to do, has zero hard cost associated with it and will go far in raising that employee's (and others') satisfaction at work.

2. Higher Wages

Paying a competitive wage and/or offering excellent benefits is an excellent way to decrease turnover rates. The more satisfaction employees have with their income level, the happier they are to come to work every day and the more likely they are to stay. If increasing wages is not possible, then spend even more time on employee recognition and appreciation programs and strengthening relationships between management and staff.

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