No company enjoys losing employees, especially when recruiting, hiring and training new talent costs valuable time and money. But, contrary to what most managers think, the perfect turnover rate is not based on retaining 100% of employees annually.

According to Gallup’s “The Truth About Turnover,” most companies incorrectly estimate what their ideal turnover rate should be. Some say 0% employee turnover is ideal, and others are aiming more realistically at 10%. Gallup found that turnover rate should be dependent on the percentage of disengaged employees a company has, rather than a standard percentage. For example, at the best world-class selling organizations. around 10% of the sales team on average are disengaged, so ideally those companies should aim for a 10% turnover rate.

But what is your company’s employee turnover rate really costing you? Every time a top employee leaves a company, it costs around $10,000 – $40,000 to recruit, hire and train someone new. On the other hand, if turnover is lower than it should be, it could mean too many disengaged employees are staying in roles not right for them. In that case a high burden is being put on your top employees to compensate for those who are disengaged, which may burn them out.

Managers concerned about turnover rate should take a good, hard look at their organization, and use the following key indicators to determine if their employee turnover rate is a severe problem.

1. Your Are Spending Too Much On Overtime 

Clock sitting on a pile of money

If you are beginning to notice a spike in the amount you’re spending on overtime, for more than just a few employees, this could indicate incorrect turnover rate. When too many employees are leaving to pursue other jobs, it leaves your company out of balance, and requires others to pick up the slack. On the other end of the spectrum, if an overly high proportion of employees are disengaged, this could leave too much work up to too few employees. Either way, if your budget on overtime is being way overspent it might be time to investigate.

2. Your Company Is Losing A Lot Of New Hires 

Employee holding his belongings in a  box

Are you constantly losing employees shortly after you hire them? Well the problem might not be the competition, it might be your hiring process. A common mistake many interviewers make is trying to appease prospective talent by given them unrealistic expectations in interviews or in the first few weeks of work. Hiring talent that doesn’t fit your company to then lose them after a few months is bad practice, and could lose you a lot of time and money. 

To avoid losing talent after you hire them, give prospects a clear picture of the job and company right away in the interview. Don’t hire talent that seems like a bad fit for your company, no matter how desirable they may be.

3. More Than A Few Employees Are Complaining To Managers

Employees holding paper frowns on their faced

A red flag that should signal your company’s turnover rate needs an adjustment is an unusual amount of complaints to managers. If more than just a few employees are complaining about lack of opportunities, poor facilities, inadequate training, bad pay, or benefits, you may have a serious problem on your hands. This could mean your top talent is unhappy, and many may be thinking about leaving.

If you are looking for ways to keep these employees that may be thinking about leaving, read our blog post, “The Importance of Employee Retention: How to Keep Your Talent.”

 4. You Are Losing Top Performing Employees

Employee handing in letter of resignation

This is potentially the most dangerous indicator that your company’s turnover rate is tipping out of balance. Remember, it’s okay to lose some employees, but what is not okay is losing your best employees. It could take years to replace someone who is hired, trained and experienced, and you cannot afford to lose too many of them. Remember, employees are a long term investment, and if you are beginning to see a stream of these experienced employees leaving, something needs to change.

Find out how to be successful manager and create the best sales team, download our latest Ebook:  

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About the Author

Linnea Goldstein 

Linnea Goldstein

Linnea Goldstein is a Marketing Co-op and Northeastern University senior, working in communications, marketing and public relations. When Linnea isn’t at work she enjoys reading, sailing and being outside.