The Real Cost of Poor Retention in Your Business

Businesses often see recruitment as an inconvenience. Just another task to add to an already never-ending long to-do list. This is especially true when you’re not an internal recruiter but a manager juggling multiple responsibilities, including HR and hiring.

But poor retention and continuous hiring aren’t just inconvenient, it can be extremely costly. Beyond the time and effort it takes to replace a team member, the hidden impacts can quietly drain your business. You can get all the way to making the offer and having them start,  investing time in training, all for them to leave soon after. You’re back to square one, feeling frustrated, disheartened, and facing another recruitment cycle that drains time, resources, and budget.

If this resonates with you, it’s because you’re not alone. According to Employment Hero’s 2025 Recruitment Snapshot Survey, which surveyed over 1000 Australian businesses, they found that:

• 27% of employers said a new hire left within their first six days.

• 22% said a new hire left within 1–2 weeks.

• 60% reported losing a new hire within the first month.

• 78% said they’ve had someone leave within the first three months.

Those numbers paint a clear picture that poor retention is a real and costly issue for many businesses at the moment. The rotating door of staff has a true ripple effect that impacts your team, your culture, and your bottom line.

Increased cost per hire

The most obvious and tangible issue when it comes to poor retention is the cost per hire increase and the financial strain it can put on the business when you find yourself repeatedly recruiting for the same roles. Here’s the part that might make HR managers or business owners gulp: the average cost per hire for Australian businesses in 2025 was between $20,000 and $26,000.

In fact, a survey conducted by AHRI, which involved over 1500 HR professionals from Australia and New Zealand, found that the cost to hire an employee more than doubled in 2021, rising from $10,500 in 2020 to $23,860 per worker. According to the report, they also found that the time it takes to make a new hire increased from an average of 33.4 days to 40 days in Australia.

You might think, “No way it costs me that much,” but these costs aren’t always obvious, and when you consider all direct, indirect, and soft costs, it quickly adds up. Beyond the obvious job advertisements or agency fees, there are hidden expenses like compliance checks, including testing for drug and alcohol, physical fitness or personality profiling, onboarding and training, setting up software and IT systems, providing equipment and uniforms, productivity loss and wages for employees. Even the time hours spent by HR and hiring managers, and administrative duties like contracts, putting together welcome packs, inductions and inputting payroll data all add up to cost per hire. Proving that it can be a serious financial drain over time on businesses.

Damage to Your Reputation and Employer Brand

If your business is constantly advertising for the same role, job seekers notice, and this can become quite damaging to your employer branding. People, right or wrong, start to assume and speculate on whether the company has culture or management issues. And unfortunately, your brand reputation quickly becomes known for ‘high turnover’ even if you may never have filled the position. Public perception starts to affect the number and quality of applications, as job seekers may actively avoid applying with the company based on their assumptions.

Instability Within Your Team

High turnover doesn’t just affect new hires; it wears on your existing team. When employees are constantly picking up extra workloads or training replacements, frustration builds. Resentment, burnout, and cynicism can quickly follow. Some team members stop investing energy into welcoming and assisting to properly train new people, assuming they’ll leave anyway…which ironically causes more turnover. It turns into a cycle of disengagement and instability that leaves everyone in the team feeling frustrated.

Decreased Productivity

When teams are constantly onboarding, productivity inevitably dips. Workflows get disrupted, service standards slip, and employees stretch themselves across multiple roles just to keep things moving. Even your most reliable team members can burn out when they’re covering gaps or spending valuable time training new starters. That time and energy are resources and losing them affects performance across the board.

Lower Team Morale and Cultural Impact

Financial losses are measurable, but the cultural cost is harder to quantify and arguably more damaging. When your workplace starts to feel like a revolving door, morale suffers. Culture isn’t just a slogan on a wall; it’s something built, lived, and reinforced by long-term employees. Without stability, those shared values and engagement start to erode, leaving your culture’s values and engagement diluted and disconnected.

Loss of Valuable Institutional Knowledge

When people frequently come and go, you’re not just losing headcount, you’re losing valuable knowledge. The how and why behind your processes, systems, and standards disappear with every departure. Over time, this loss can impact quality, consistency, and even customer satisfaction. Institutional knowledge is one of the most undervalued assets a business has, and once it walks out the door, it’s not easily replaced.

A Healthy Level of Turnover Is Normal

 

Of course, not all turnover is bad. According to the Australian Institute of Business, the average Australian employee tenure is around 3.3 years. This figure is trending downwards due to the rise of the gig economy and a casualised workforce. Depending on where the worker is in their life and career, the length of tenure also changes. The average job tenure for workers over 45 is 6 years and 8 months, while for under 25s it’s just 1 year and 8 months.

While a bit of movement can be healthy. New team members bring fresh ideas, different experiences, and energy that can help a business evolve. The key is knowing the difference between natural attrition and avoidable turnover, the kind driven by internal issues like poor communication, lack of progression, or cultural misalignment.

Focusing on retention isn’t just about saving money for businesses. It’s about building stronger, more productive teams and maintaining a workplace culture people genuinely want to be part of. Employee well-being, flexibility, and belonging will continue to drive loyalty in the years ahead. Businesses that prioritise these factors will see the payoff in performance, culture, and long-term success.

For more tips, tricks and advice on hiring for your team, explore our other blogs or reach out to our team.