What Replacing Costs

SHRM puts the cost of replacing an employee at 50–200% of their annual salary, varying by level and role. (Professional body — the reference figure for this page.)

Most organisations budget for the recruitment fee, which is the smallest part. For a related reference, see workplace stereotyping.

The seven components

Recruitment. Agency fees, advertising, the hiring team's hours. The part everybody counts.

Vacancy. The work not being done, or being done by colleagues at the expense of theirs.

Onboarding. Formal training plus the informal time of everybody who answers questions.

Ramp-up. The gap between arriving and being fully productive, which for a senior technical role is commonly estimated at six to nine months. (Industry analysis.)

Load on the remaining team, which is the component that produces the second departure.

Lost institutional knowledge — the things somebody knew that were never written down.

And the risk of a bad hire, which restarts the entire calculation.

Running it on your own numbers

Take one departing role. Take the annual salary.

Apply the SHRM range — a straightforward role near the bottom, a senior or specialist one near the top.

Multiply by departures in the past twelve months.

Then group by manager. If the departures cluster, the number attaches to a specific management problem rather than to a general regret, and a number attached to something specific is one somebody can act on.

Where the estimate goes wrong

Understating ramp-up for senior roles, which is the single largest error. A replacement at 80% capability for eight months is a real cost that no invoice records.

Ignoring the second-order departure. A team absorbing extra load for six months produces its own resignation, and that one is rarely attributed to the first.

And counting only voluntary departures. A managed exit costs the same to replace.

What it justifies

Retention spending that looks expensive against a single salary and is cheap against a replacement.

Manager development in particular, since manager quality is the largest controllable factor and the population that receives the least investment.

And flexibility arrangements, where the mandate arithmetic puts roughly 14% additional attrition against whatever the policy was supposed to gain.

What it does not justify

Retaining somebody who should leave. The calculation is about avoidable departures, and applying it to every departure produces a case for keeping people in roles they have outgrown.

Or counter-offers, which address the stated reason rather than the actual one and have a poor record.

The short version

• SHRM puts replacement at 50–200% of annual salary; recruitment fees are the smallest of seven components
• The others: vacancy, onboarding, ramp-up, load on the remaining team, lost institutional knowledge, and bad-hire risk
• Run it on one role, apply the range by seniority, multiply by twelve-month departures, then group by manager
• The commonest error is understating ramp-up for senior roles — 80% capability for eight months appears on no invoice
• The second-order departure from an overloaded team is rarely attributed to the first
• It justifies manager development and flexibility; it does not justify keeping people who should leave, or counter-offers

For additional context on this topic, see Adobe.