Replacing a leaver is commonly estimated at 6–9 months' salary once hiring, onboarding and lost productivity are counted. Group health cover averages about £57 per employee per month — roughly £684 a year. On those estimates, a package that helps retain just one employee in a small team can pay for itself several times over.
- ✓Replacement cost is commonly estimated at 6–9 months' salary per leaver, all-in.
- ✓Group health cover averages ~£57/month — about £684 per employee per year.
- ✓One prevented departure can fund benefits for a whole small team for years.
The number nobody puts in the budget
Every founder knows their payroll to the pound. Very few could say what churn cost them last year — because replacement cost never appears as a line item. It's smeared across recruiter fees, hiring-manager hours, onboarding time, the vacancy's lost output and the six months a new starter takes to reach full productivity. HR research commonly estimates the all-in cost at 6–9 months of the leaver's salary — estimates vary by role and seniority, but even the conservative end is a large number.
The worked example (illustrative)
Here's how the arithmetic plays out for an illustrative 12-person firm on an average salary of £45,000, using the common 6–9 month replacement estimate and 2026 market benefit costs. This is a labelled illustration, not a client case:
| Line | Illustrative annual cost |
|---|---|
| Group health cover, 12 staff (~£57/head/month avg) | ~£8,200 |
| EAP for the whole team | ~£120 |
| Total benefits spend | ~£8,300 |
| Cost of one £45k leaver (6–9 months' salary) | ~£22,500–£33,750 |
| Cost of two leavers in a year | ~£45,000–£67,500 |
The whole package costs roughly a third of one departure. Put differently: if better benefits help you keep one person who would otherwise have left, the scheme has paid for itself for around three years. If your firm loses two or three people a year — not unusual for a growing twelve-person company — the comparison stops being close.
Does health cover actually retain people?
No benefit guarantees retention, and it would be dishonest to claim otherwise — pay, management and the work itself all matter more than any perk. But health cover has three properties that make it unusually retention-relevant among benefits:
- It's the most-valued voluntary benefit in employee rankings, and only around 31.5% of employers offer it — so having it genuinely differentiates.
- Its value compounds with use. An employee whose consultation came in days rather than an NHS median 12.4 weeks remembers it; a leaver also knows a new employer's scheme may treat their now pre-existing condition differently.
- It signals care at low cost. A pay rise of equivalent salience costs far more than ~£684 a year — our retention vs pay rises guide runs that comparison in full.
See the other side of the equation
Run it for your own firm
The exercise takes ten minutes: count last year's leavers, multiply by 6–9 months of their salaries, and set the result against a real benefits quote for your census — remembering premiums are generally corporation-tax deductible, with Class 1A NIC at 15% on the benefit. Most founders who run the numbers find they've been optimising the small line while ignoring the big one. We compare group schemes from Bupa, AXA Health, Aviva, Vitality, WPA and The Exeter to get you the real quote side of the equation.
Then make the result visible. Put estimated churn cost in the same board slide as the benefits line, and revisit both at each renewal: leavers prevented is unknowable, but leavers, exit-interview reasons and benefit utilisation are all measurable. A benefits budget defended with the churn number beside it survives cost reviews; one presented alone rarely does — which is how firms end up cutting the £8,000 line to protect themselves from the £45,000 one.
Frequently asked questions
What does it cost to replace an employee in 2026?
Commonly cited HR estimates put the all-in cost at 6–9 months of the leaver's salary — recruiter fees, hiring time, onboarding and the productivity gap while a replacement gets up to speed. For a £45,000 employee that's roughly £22,500–£33,750 per departure, though estimates vary by role.
How does benefits cost compare with churn cost for a small firm?
Starkly. Group health cover averages about £57 per employee per month — around £8,200 a year for a 12-person team — while one £45k leaver is estimated to cost £22,500–£33,750. On those figures, a package that helps prevent a single departure pays for itself roughly three times over.
Do employee benefits actually improve retention?
They're one lever among several — pay, management and the work itself matter more. But health cover is consistently ranked the most-valued voluntary benefit, only ~31.5% of employers offer it, and its value compounds once an employee has used it. It shifts the odds rather than guaranteeing the outcome.
What retention maths should a founder run before buying benefits?
Three numbers: last year's leavers times 6–9 months of their salaries (estimated churn cost), a real group-cover quote on your census (benefits cost, average ~£57 a head monthly), and the break-even — how many departures the package must help prevent to pay for itself. It's usually less than one a year.
Is spending on retention benefits tax-efficient for a company?
Generally yes: group health premiums are normally an allowable business expense for corporation tax. Employees pay benefit-in-kind tax on the premium and the employer pays Class 1A NIC at 15%, reported via P11D until payrolling becomes mandatory in April 2027. That net cost is what belongs in the comparison.