The cost of staff turnover for UK small businesses

Key takeaways

The cost of staff turnover is the total spent when someone leaves: lost output during notice and vacancy, recruitment, training and management time. For a £28,000 admin role, a realistic cost per leaver is about £6,000–£12,000. In a small team, one leaver a year can wipe out any saving from paying lower wages.

• £6,000–£12,000 per leaver is realistic for a £28,000 admin role.
• Vacancy and training usually cost more than recruitment fees.
• Small teams feel each leaver as lost cover and backlog.
• Managed outsourcing moves replacement cost to the provider.

What is the cost of staff turnover?

The cost of staff turnover is the sum of costs caused by an employee leaving and being replaced. It includes lower output during the notice period, the vacancy gap, recruitment, training the replacement and extra management time. Most of it does not appear as a line in the accounts, which is why it is underestimated.

• In-house vs outsourcing: which model is more cost-effective?

How do you calculate turnover cost per leaver?

Add these five parts for each leaver.

• Notice period: lower output while the leaver works their notice.
• Vacancy: overtime, backlog or lost sales while the role is empty.
• Recruitment: adverts, agency fees and interview time.
• Training: lost output while the replacement learns, plus trainer time.
• Management: extra hours spent covering and supervising.

• The cost of an unfilled vacancy
• What it costs to recruit an employee in the UK
• The cost of training a new employee

What does a worked example look like?

An administrator on £28,000 resigns. Four weeks of notice at reduced output loses about £700. A six-week vacancy covered partly by overtime costs about £3,000. Direct recruitment costs about £1,400, and training the replacement about £4,000. The total is about £9,100, roughly a third of the salary.

With an agency fee of £5,600 instead of direct hiring, the total rises to about £13,700.

What is the annual cost of turnover?

Multiply the cost per leaver by the number of leavers a year. A team of ten with two leavers a year, at £9,000 each, loses about £18,000 a year to turnover. That is a real cost of the in-house model that rarely appears when comparing it with outsourcing.

• High turnover in admin roles: what it tells you

How does outsourcing change turnover cost?

Outsourced providers have turnover too, but they carry its cost. A managed provider recruits and trains replacements within its rate and keeps cover running, so a departure does not create a vacancy on your side. Ask any provider how it measures and manages its own turnover.

• Staff turnover in outsourced teams
• BPO Solutions for UK businesses

How can you reduce turnover cost in-house?

Reduce the number of leavers and the cost of each. Fair pay, clear progression and manageable workloads cut leavers; written processes and cross-training cut the cost of each departure. Removing repetitive overflow work from a stretched team can also reduce burnout-driven resignations.

• Small team burning out? Capacity is the fix

How do you calculate your staff turnover rate?

Divide the number of leavers in the last 12 months by the average number of employees over the same period, and multiply by 100. A team averaging ten people with two leavers has a turnover rate of 20%. Track it by role, because turnover is usually concentrated in a few positions.

• Staff utilisation rate: the cost of paid idle time

What does this look like in practice?

A pattern we see in UK contact-heavy SMEs: the customer service role has turned over three times in two years. Each time, the owner covers the phones and rebuilds the training. Moving first-line support to a managed team, and keeping one in-house lead, ends the cycle.

• See client work

Turnover cost checklist

Use these steps to measure it.

• Count leavers in the last 12 months by role.
• Cost notice, vacancy, recruitment, training and management per leaver.
• Multiply by leavers per year.
• Add the result to your in-house cost comparison.
• Identify the roles that turn over most often.

Next step

Tell us which roles turn over most. We will cost the turnover and compare it with a managed alternative in a 30-minute call.