Compensation Glossary

Termination Expenses

There’s no doubt that job termination affects people, but it also impacts the company's bottom line. Termination is expensive. When you dismiss an employee, typically it will cost between 50% and 60% of that person’s annual salary to refill the position. In the best case scenario, the company is faced with the costs of advertising, hiring and training a new employee to fill the position. Until someone new is hired, the rest of their team may have to work overtime, resulting in additional salary expenses. The terminated employee will also likely file for unemployment. In the worst case scenario, an employee who feels the termination was wrongful may decide to sue, which results in legal fees.