In today’s job market, staff turnover has become a regular challenge.

Once-stable workforces are shifting, and with that comes a cost – one that goes well beyond simply swapping one salary for another.

Yes, rising wages are a reality.

Many employees expect pay rises due to inflation and increased living costs.

Employers, still recovering from COVID impacts and supply chain issues, may feel squeezed.

But here’s the critical question: can you afford not to meet a pay rise request?

The true cost of replacing a staff member is much higher than many realise.

Depending on the role, replacing someone can cost 30-50% of their annual salary – and that’s for mid-level staff.

For senior or highly specialised roles, the replacement cost can be up to four times their annual salary before the new hire is fully effective.

What Makes Replacing Staff So Expensive?

Many of the costs are hiding in plain sight. Here are just some of the direct, often unavoidable expenses:

• Advertising the role
• Recruitment agency fees
• Screening and background checks
• Psychometric testing
• Temporary staff or contractors to cover the gap
• Relocation costs or recruitment incentives
• External training for the new hire

And that’s just the beginning.

There are also substantial indirect costs that affect time, morale, and productivity:

• Hours spent by management and team members on recruitment tasks
• Client handovers and introductions
• Onboarding, training, and supervision of the new recruit
• Replacement of equipment and workspace setup
• Reduced output during the transition
• Disruption to team dynamics and morale
• Loss of institutional knowledge and potential customer relationships

Then there’s the emotional and performance toll.

Remaining staff may feel overburdened or anxious.

Productivity often drops – not just because someone is leaving, but because they may have mentally checked out well before their last day.

A Costly Trade-Off

So, when a team member earning $70K asks for a raise to $75K, it’s tempting to say no.

But if that refusal triggers a resignation, you may find yourself paying far more than $5K to replace them – both financially and culturally.

Final Thoughts

Rather than viewing pay rise requests as a threat to your bottom line, consider them a potential investment in stability.

Sometimes the cheapest, most efficient move is to retain the staff you already have – especially if they’re performing well.

Of course, there’s another solution altogether: create a workplace so engaging and rewarding that no one wants to leave.

Let me know if you’d like to talk more about this, or any other, business management topic. I’m happy to help.