Why employee turnover is your biggest hidden cost (and how to prevent it)

We invest heavily in attracting new talent, but retaining it is just as important. Yet the impact of employee turnover is often underestimated. Every departure doesn’t just mean a loss of knowledge and experience — it also affects teams and continuity.

According to LinkedIn (2023), knowledge workers change employers every two to three years on average when development opportunities are lacking. Among the youngest generation, this happens even faster. Research by Randstad (2025) shows that Gen Z employees stay with an employer for an average of just 1.1 years, mainly when they experience too little growth or purpose.

The real costs of turnover
A departure costs more than you might think. Expect to spend between 50% and 200% of an annual salary to replace one employee. These (in)direct costs can be divided into several categories.

1. Departure and handover costs

• Time spent on exit interviews
• Administrative costs related to offboarding
• Temporary replacements via interim professionals with higher rates
• Handover of ongoing projects

2. Impact on work and team

• Loss of efficiency and productivity
• Loss of expertise and experience
• Clients or relationships walking away
• Missed deals or opportunities
• Knowledge and expertise ending up with competitors
• Increased workload for colleagues, leading to dissatisfaction or burnout

3. Replacement costs

• (External) recruitment costs
• CV screening and interviews
• Selection and assessment costs
• Administrative costs for onboarding
• Higher salaries or additional benefits to attract new talent

4. Onboarding and training

• Time needed to onboard new employees
• Additional training or courses
• Lower productivity during the first period

Example calculation:

• Imagine an organization with 500 employees, an average annual salary of €65K, and a turnover rate of 15%.
• Each year, 75 people leave the organization.
• The turnover cost for middle management or specialist positions averages 150% of the annual salary.
• That means €97,500 per departing employee.
• 75 x €97,500 = €7,312,500 per year.
• If turnover could be reduced by just 20%, the organization would save €1,462,500 annually.

Why turnover is so high right now
Turnover is high in many sectors. Combined with the tight labor market, this causes serious concern for HR. This is largely due to shifting employee expectations:

• More focus on work-life balance and purpose
• Development opportunities and growth play an increasingly important role
• Lower engagement leads to faster departures
• Fewer entry opportunities for starters due to demand for proven experience

How to prevent employee turnover
It’s becoming less about salary and more about engagement, growth opportunities, and purpose. Employees who feel valued and can grow stay longer, are more productive, and contribute to a stronger culture.

1. Invest in growth and development
   Turnover often starts with stagnation. When employees see no perspective, they start looking elsewhere. Make growth a structural part of work. Use short-cycle feedback moments, coaching, and the right tools. This way, development becomes a continuous process.
2. Make feedback a natural part of work
   Feedback is the engine of growth — not once a year in a performance review, but continuously. With Nela, feedback becomes simple, accessible, and turns into concrete development actions. This way, feedback truly leads to growth.
3. Create a culture of trust
   People stay where they can be themselves. A safe and positive culture where mistakes are seen as learning opportunities stimulates openness and collaboration. Managers and leaders play a key role in this.
4. Recognize signals early
   Less initiative, lower engagement, and increasing workload are often the first signs of departure. Nela helps identify those signals early so you can take action before someone decides to leave.
5. Reward engagement
   Value not only results but also effort and collaboration. This ensures employees feel seen and appreciated, which further increases engagement.
6. Review employment conditions
   Salary matters, but it’s not the only reason people choose an organization. Review your secondary benefits and assess whether they still align with employees’ needs. Think of training budgets, wellbeing programs, or more flexibility in working hours and locations.
7. Conduct open exit interviews
   When someone leaves, it’s an opportunity to learn. An open and honest conversation provides valuable insights into what’s happening within the organization. Use that feedback to improve policies and culture.

How Nela helps prevent turnover
Turnover is rarely a surprise, it’s often a missed signal. Employees don’t just leave; they gradually disengage. Nela helps make that process visible and actionable.

Nela identifies where professionals excel and where extra support is needed. This allows mentors to offer targeted support and gives professionals the attention they need to grow.

The dashboard provides instant insight into skill development, turnover risks, and the contribution of teams to client value. This way, Nela connects talent development directly to strategy and customer satisfaction.

Frequently Asked Questions about Employee Turnover Costs

Q: What are the direct costs of employee turnover?
A: Direct costs are the expenses you incur immediately when an employee leaves. Think of recruitment costs, job ads, recruiter hours, selection processes, and administrative handling. Temporary replacements, for example, hiring an interim professional, also fall into this category.

Q: What are the biggest hidden costs of turnover?
A: Indirect costs are often much higher but less visible. These include the loss of knowledge and experience, know-how transferring to competitors, clients leaving, reduced productivity during onboarding, and extra workload for colleagues. The higher salary and additional benefits of a replacement hire also add up. Depending on the role and seniority level, the total costs can amount to 30% to 200% of the departing employee’s annual salary.

Q: How can Nela help reduce those costs?
A: Nela detects early signals when employees start to lose engagement. By continuously collecting feedback at natural moments in the workflow, Nela helps organizations take action before someone decides to leave. That prevents costly replacements and preserves knowledge and stability within the team.

Q: What insights does Nela provide about turnover and development?
A: Nela’s dashboard gives a clear overview of where talent excels, where risks are emerging, and which teams need extra attention. This means you not only see where turnover happens, but also why. With that insight, you can take targeted action.

Q: What’s the return on investing in Nela?
A: Organizations that actively manage engagement and development save millions of euros each year in turnover costs. Nela makes feedback and growth a continuous process — helping people stay longer, perform better, and collaborate more effectively. Less turnover, more continuity, and lower costs.