How to Calculate the Real Cost of Losing Employees

Use this employee replacement cost calculator and risk assessment for your 2022 planning.


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Stressed millennial coworkers worried about company failure, falling rates and bankruptcy. Frustrated employees concerned after reading bad business news. Concept of work problems

Editor’s note: Want to dive deeper? Listen to this POPS! Podcast exclusive preview for Workest readers. It’s an “author’s cut” interview with Kevin Marasco, who co-wrote this year’s WSJ bestseller, People Operations.

Listen to the podcast:

More than 20 million American workers quit their jobs this year.

Likely some of them worked for you. If you are mainly focused on replacing them, you’re not asking the right questions. And you might be missing the bigger risks to your business.

I sat down with Kevin Marasco, co-author of the practical guide and WSJ best seller, People Operations to discuss. Kevin draws on more than 20 years of experience in technology and HR, plus data and insights from working with thousands of small businesses for the book to ground his suggestions.

Following are some highlights from our discussion, captured in entirety in the POPS! Podcast, linked above.

As you look at the costs for your 2022 business plan, here are questions and some insight on numbers you might be overlooking when it comes to the cost of losing people (even while they are still working for you).

Who is driving your business?

Half of the American workforce is considering leaving their jobs.

Most company leaders are looking at this as a time to double down on keeping their “star” players. For sure, the superstars — or top 5-10 % of your business that might have a disproportionate impact on your revenue, are key. And it’s highly likely that they are being actively recruited by your competitors with a number of enticing benefits and perks.

But don’t overlook “the middle” performers — 50-70% of your team — when you look at your business continuity. It’s easier than ever for them to find alternatives too.

What are you doing to keep them?

Of course, salary is always a key factor, but what else motivates your staff?

A company’s ability to unlock the true motivators for ALL of its staff is surging in importance in today’s work environment.

There are a number of scientifically researched motivation models that point to “soft” benefits like autonomy, mastery, play, purpose and potential.  Not all motivators work for all people, so this is a really important time to ask vs. assume for your team.

Beyond that, it’s a good time to take a close look at how your organization delivers on employee experience — particularly in light of the massive shifts in how, when and where people work as we move into 2022.

In the shadow of the pandemic, many people have begun to shift their priorities from “living in the cracks between work, toward working in the cracks between living.”

Look at opportunity cost vs. replacement cost

If you are only looking at the salary (and don’t be stingy here either) to replace a departing employee, you are missing a much bigger risk to your business: the total lost opportunity.

If you are only looking at the salary (and don’t be stingy here either) to replace a departing employee, you are missing a much bigger risk to your business: the total lost opportunity.

For example, start by looking at each person and each role in your business and their unique connection to:  tacit organizational knowledge; individual and team productivity; customer relationships; sales; production or service, etc.

Then consider the downstream “domino” impacts to: both immediate and lifetime potential value of lost customers; short and medium term workload and burnout on remaining staff members; backlog on other roles and work; impact on expansion; etc.

And don’t forget that these opportunity costs quickly pile up as a result of people who’ve left your business, and also those that remain but are not fully engaged.

What you can do

  1. Understand the true cost of key positions in your business. A step-by-step employee replacement cost calculator/risk assessment is included in the Employee Motivation Guide, linked below.
  2. Reduce turnover. Investing in programs to upskill, coach, and motivate your current staff will have an additional advantage of incentivizing new candidates to join your organization.
  3. Build and maintain a candidate pipeline. Turnover is a reality, so always be meeting with great people.
  4. Actively “re-recruit” your current staff. Conduct regular “stay interviews” and conversations about what motivates them about working with you.
  5. Advice in one word: Be proactive. The world of work is always changing, and smart business leaders are continually changing with it.

Download our free Employee Motivation Guidebook  (including employee retention cost calculator).

Bonus: Free Book

Be one of the first 10 people to send us a note to [email protected] with your number one people operations goal for 2022, and win a free copy of our People Operations book.

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Rather watch the POPS!Podcast? Here is a link to our POPS! Playlist on YouTube.


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