Employee turnover has enormous hidden costs. The cost of a termination ranges from half an annual salary for nonexempt employees to twice the annual salary of highly skilled exempt employees.
What’s more, when people quit, there’s lost production time and both lower quality of work and burnout as others are made to pick up the slack. The time spent training another person requires managers to redirect their focus to hiring activities, which also contributes to less efficiency and more cost.
Annual staff turnover rates in the U.S. range from 24 percent to 50 percent — depending on how turnover is defined and the particular industry measured. On average, companies lose 18percent of their workforce each year, of which 12 percent is voluntary and 6 percent involuntary. Of those who quit, 31 percent leave within the first six months of starting a job. A turnover rate exceeding 10 percent is considered excessive for optimum operational performance.
In 2022, the overall cost of voluntary employee turnover in the U.S. amounted to more than $1 trillion.
Reducing terminations offers a major cost reduction opportunity, along with happier and more productive people.
The D.C. region McDonald’s is a case in point for taking the reins to improve talent management. In doing so, they were able to reduce crew turnover by 66 percent and management turnover by 50 percent. This resulted in a 10 percent reduction in overall costs.
Consider taking these four steps employed by the regional McDonald’s team to reduce turnover and labor costs while also strengthening retention:
- 1. Measure turnover
Solving their labor turnover costs required an accurate turnover count. As a consultant once observed, “You can’t change what you can’t measure.” They needed to calculate their annualized turnover to evaluate the effects of changes and establish a baseline for accountability.
For example, on January 1st the business employed 30 people. During the four months through April they employed as many as 35 people. Over the same four months, eight employees quit.
To calculate the average number of employees for the four-month period they:
- Added the number of employees at the end of each month: 30 + 33 + 32 + 35 = 130
- Divided 130 by 4 months = 32.5 average head count per month
To calculate the annualize turnover rate they:
- Divided 8 (number of terminated employees) by 32.5 (average number of employees) = 0.246
- Multiplied 0.246 x 100 = 24.6 percent (annualized turnover rate)
- 2. Create a culture of inclusion and engagement
McDonald’s managers made it a point to listen to staff, to include them when planning and developing goals, to collaborate with them when making decisions and solving problems, and to inspire them with rewards and recognition for continuous improvement and attaining goals. Such practices also included involving employees in decisions about recruitment and retention initiatives.
- 3. Focus on stabilizing labor
In weekly meetings, managers and supervisors reported on employees who had recently quit and on anyone they anticipated leaving. They also shared their plans to retain them. Persons who weren’t expected to leave but did were discussed to problem-solve with managers and better forecast leavers. Action plans included developing them instead of writing them off. For additional accountability, weekly or monthly reports on annualized staff turnover in each department provided a greater sense of urgency for reducing staff turnover.
- 4. Improve onboarding
Implementation of 12 weekly one-hour sessions enabled new hires to adapt to their new culture and to network with others. They learned about policies and procedures and the duties of each part of the company. They also received recognition for work accomplishments, and were able to engage with one another in fun activities.
The lesson learned is that, when attempting to address employee turnover, companies are successful when they use data to count, record, and set targets for what they wish to achieve. Then, when they solve problems together, make changes for the better, and celebrate improvements, retention improves.
About the Author
Ron Robinson, author of the Amazon bestseller, Practices of Resilient Companies: Overcome Disruption with Compassion, Collaboration and Knowledge (Business Expert Press, March 2, 2026), has consulted with and helped turn around enterprises ranging from Fortune 500 companies to mid-size organizations to startups. He has presented to audiences as large as 3,000 and facilitated groups as large as 300 participants. His new book provides a business model for companies and nonprofits to become more resilient and succeed while navigating today’s disruptive forces. Learn more at ronspeaking.com.
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