October 29, 2021 By SmartBiz Team

When operating a business, employees play a very valuable role. All businesses vary; although, more often than not, employees do the frontline work that keeps the business operational. It’s also not uncommon for employees to have direct interactions with customers.

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The innate value that employees bring to a business is the leading reason why employee turnover is so costly. Now, some costs of employee turnover are quite apparent; loss of help and the need for more marketing to bring in potential new hires are a few examples.

However, there are other hidden costs of employee turnover that small business owners should be aware of.

Four Hidden Costs of Losing Employees

As you run your business, knowing the hidden costs of employee turnover makes a huge difference. While turnover prevention is possible, all businesses lose some employees at some point. Therefore, knowing the hidden costs plays a vital role in knowing how to shoulder the losses and bounce back from employee turnover.

Reduced Productivity in the Business

The reduction of productivity in the business is a real and hidden cost of employee turnover. Each employee working for the business plays a role in that business’ progress and success. Therefore, when an employee leaves, they also take their influence on the company with them.

Far too often, the magnitude of productivity that an employee brings to the business is easy to miss until it’s not there anymore. This can make reduced business productivity an even more insidiously hidden cost of employee turnover.

Once a worker for the business becomes a former worker, a gap is left. This then causes other people working for the business to have to fill in until the previous worker’s replacement arrives. Depending on the nature of the business and the former employee’s duties, this gap can create stress and tension in the workplace environment.

Damage to the Business’ Reputation

At one point or another, all businesses will experience some form of employee turnover. However, consistent or frequent employee turnover can have devastating impacts on the business as a whole.

When a business regularly loses employees, this can cause issues not just within the company, but also with the partners and customers who interact with the business. Customer loyalty is imperative for businesses; however, when a business is facing issues with keeping staff on board, this can impact how the company engages with customers.

Consistently negative interactions with customers can hurt the reputation of the business in the long run. It may also make certain partners think twice before working with a business that has a damaged reputation. In this regard, consistent employee turnover tends to cause a negative domino effect.

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New Onboarding Costs

The costs of onboarding new employees to fill the gap of turnover often are not taken into account. This is not just about marketing or putting out ads on social media sites. When a new worker comes into the business, it costs time and resources to conduct interviews, check up on provided references, and implement on the job training.

The onboarding fees that inherently stem from employee turnover are often forgotten about and overlooked. It’s also important to note that costs of turnover are not necessarily limited to fiscal costs. Time and resources are also vital supplies that take hits when turnover happens.

Loss of Company Knowledge

Employees who work for a business for any significant amount of time pick up on details overlooked by others. These details include company rules, attendance policies , rapport with co-workers, the best means of doing the job, and more. When employees have this information, it impacts how they work and interact with others around them.

There is no denying that new hires can eventually pick up on this company knowledge, however, it takes time for this to happen. The loss of a worker with company knowledge that can benefit the business is an understated, hidden cost of employee turnover.


It is important for all businesses to understand the costs of employee turnover. It is not possible to completely steer clear of turnover; however, there are some steps that business owners can take to keep employee turnover to a minimum.

Being as sure as possible that new hires make a good fit for the business is one critical step. Sometimes, when a gap or need exists, there is the temptation to fill this vacancy as soon as possible. However, this is not always the best call. In the long run, a bad hire can cost a business more than waiting a little bit longer and bringing the right person on board.

Knowing the costs of employee turnover can save companies a ton of heartache, resources, and stress. It can also make a huge difference to witness how well workers and new hires get along with one another. Teamwork is paramount for any business to thrive in the long term; it also creates a stronger workplace unit, thus reducing the likelihood of employee turnover.



About the Author

Raya Khashab is the CEO and co-founder of ezClocker®, a time tracking and scheduling software for small businesses. She is passionate about customers and building products that change the way people run their businesses. She is also a big supporter of the startup community and helping people achieve her dreams.

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