Mr. CFO: Employee Turnover is Costing You Millions

Employee turnover is a persistent issue, one that affects not only team morale and productivity, but your organisations bottom line. As a CFO, fully comprehending the true cost of turnover is pivotal for informed, strategic decision-making.

I recently spoke to the CFO & CEO of a financial services company in Hong Kong with a team of ~500, and an annual turnover of 125 employees (25% churn), and an average salary of HK$68,000. The gross salary loss due to turnover comes to HK$8.5 million/year (US$1.2M). But the financial impact doesn't stop there.

Industry benchmarks suggest the total cost of turnover—incorporating recruitment, onboarding, training, and productivity loss—ranges from 50-200% of an employee's annual salary. Now, imagine this cost coupled with an extended recruitment period of 6+ months. The financial implications are drastic!

Scenario 1: ~50% of an Employee's Salary

Taking the conservative end of the industry benchmark, 6 months or 50% of the annual salary, the estimated total cost of turnover becomes:

HK$8,500,000 (gross salary loss) * 6 months = HK$51 million per year (US$6.5M)

Scenario 2: ~150% of an Employee's Salary

At the higher end (150%), the total cost of turnover rockets:

HK$8,500,000 (gross salary loss) x 18 months or 150% = HK$153 million per year (~US$20M).

These calculations illuminate the stark reality: the hidden costs of employee turnover are massive, dramatically impacting your organisation's bottom line. The urgency for strategic employee retention initiatives, efficient recruitment, and effective onboarding and training is more critical than ever.

As CFOs, the challenge falls to us to address these costs head-on. Investing in our employees and talent pipeline strategies isn't just a matter of good practice—it's a sound financial strategy. By championing proactive retention and talent acqusiition efforts, we can foster a more engaged workforce, deliver significant savings, and drive a healthier bottom line.

Let's continue the dialogue. Share your experiences with employee turnover and strategies for managing these hidden costs. Your insights can inspire change.