1. In the February Resignation Wave, the Greatest Risk Is Not Headcount Shortage, but Cost Distortion
Companies often say, “If someone leaves, we can always hire a replacement.” What they should be more concerned about is that once an employee leaves, the costs the organization bears are rarely limited to recruitment expenses.The real costs are usually scattered across different departments, processes, and points in time: delayed deliverables, quality fluctuations, increased internal and external coordination costs, and the diversion of management time away from core responsibilities.
As a result, only a small portion of the cost is visible in the accounts, while the business itself is significantly eroded. More critically, distorted cost visibility leads to flawed management decisions.
When companies see only “recruitment costs” but fail to recognize the erosion of efficiency and gross margins, they are likely to misallocate resources— failing to fix broken systems or invest in necessary backup capacity. The outcome is predictable: every February, the same problem is addressed again, but at an even higher cost.
Note: Invisible costs are the most expensive, because without visibility, there is no starting point for improvement.
Image source: FREEPIK
2. Personnel Costs Are Not Just Expenses, but a Form of Risk Exposure
While personnel costs are often classified as fixed expenses, they also represent a cost category with a high degree of uncertainty. When turnover occurs in key positions, costs rarely increase in a linear manner.Instead, they trigger a chain reaction of impacts:
- Delivery delays (extended handover periods and disrupted project timelines)
- Increased rework (knowledge gaps leading to unstable quality and higher rework rates)
- Quality volatility (new or replacement staff have not yet reached a stable performance level)
- Rising client communication costs (delays, changes, apologies, and remediation all require additional resources)
- Forced diversion of management decision-making time (time originally allocated to market analysis and strategy is pulled away)
These impacts do not necessarily appear immediately within a single expense line item. More often, they emerge one or two quarters later as declining gross margins or slowing growth.
When companies look only at financial statement outcomes, they often conclude that “market conditions have worsened.” In reality, many of these cases stem from the gradual erosion of organizational stability.
Note: Issues related to personnel costs are rarely painful at the moment they arise— they tend to surface later, slowly, like ongoing internal bleeding.
3. The Three Most Underestimated Costs of the Job-Hopping Wave
To properly assess the impact of the job-hopping wave, companies must first deconstruct costs into three layers. Only then can they avoid miscalculation and identify the governance gaps that truly require correction.(1) Recruitment and Onboarding Costs
These extend beyond recruitment channel expenses.
They include interview time (from both management and staff), onboarding training, handover arrangements, and HR administrative processing. What many companies underestimate is the cost of time. Yet time is the scarcest resource for management.
(2) Productivity Gap Costs
Every new hire faces a learning curve. When roles involve client delivery, project management, or cross-functional coordination, this adjustment period is even longer. The cost during this phase is not merely salary.
It manifests as reduced efficiency, increased errors, rework, and delivery delays—ultimately impacting gross margins and client relationships.
(3) Management Decision Costs (Opportunity Costs)
When managers are forced to devote significant time to backfilling and coordination, time originally allocated to market development, product strategy, and financial planning is diverted. Opportunity costs are rarely recorded in accounting systems, yet they often determine a company’s competitive position one year later.
Only by aggregating these three layers of cost
can organizations understand the true price of the job-hopping wave.
Note: Focusing solely on recruitment expenses is like observing only the visible tip of the iceberg.
Image source: FREEPIK
4. HR Internal Controls under ESG Governance: Four Monitoring Lines Companies Must Establish
As long as workforce risks are managed based on intuition, February anxiety will repeat itself every year.The essence of governance is not to eliminate all resignations, but to identify risks early, reduce their impact, and build organizational resilience.
At a minimum, companies should establish four traceable monitoring lines:
(1) Whether the structure of personnel costs aligns reasonably with revenue and gross margin
For example, is the personnel cost ratio rising abnormally during growth phases? Are increases in departmental costs genuinely resulting in higher output? If costs rise while gross margins decline, it often signals inefficiencies or process breakdowns.
(2) Whether turnover is concentrated in specific departments or under certain managers
Highly concentrated turnover is rarely coincidental. It often indicates structural issues in system design, management mechanisms, or job design. In such cases, raising salaries alone typically addresses symptoms rather than root causes.
(3) Whether key positions have succession and backup arrangements
Without backup for critical roles, turnover immediately translates into delivery and operational risks. Backup does not necessarily mean hiring additional staff. It means institutionalizing processes, knowledge transfer, authorization structures, and handover rhythms, so that when people leave, the system does not leave with them.
(4) Whether EAP usage trends indicate that burnout risk is accumulating
Companies should treat EAP not as a promotional initiative, but as an early warning mechanism for risk. By observing utilization rates, trends in issue categories, and referral volumes from managers in an anonymous and aggregated manner—together with absenteeism, grievance, and turnover trends—organizations can assess whether burnout risk is accumulating and which departments require prioritized intervention.
Note: Management without monitoring lines ultimately relies on luck.
5. Four Steps to Establish “Reviewable” HR Risk Management
To incorporate workforce risk into governance, companies cannot rely on slogans alone. The system must be reviewable, traceable, and comparable. The following four steps are recommended:(1) Align definitions
Turnover rate, personnel cost ratio, and the definition of key positions must be standardized. Without consistent definitions, analysis becomes distorted and management cannot conduct period-to-period comparisons.
(2) Clarify data sources and accountability
Identify which figures come from payroll systems, which from HR records, and which from operational reports. If data sources are unclear, the numbers cannot be trusted and therefore cannot support governance.
(3) Establish a fixed reporting rhythm
On a monthly or quarterly basis, consolidate personnel cost structure, turnover rate, key position risks, occupational safety indicators, and anonymized EAP data into a one-page summary. The focus is not on aesthetic presentation, but on enabling management to track and compare consistently using the same format.
(4) Link analytical results to governance decisions
When risk levels rise, what is required is usually not short-term subsidies, but a return to system accountability. Is the performance mechanism reasonable? Are authority and communication consistent? Is there a need to strengthen backup arrangements and processes? Are decision rationales traceable? Only by incorporating improvement actions into internal control and management rhythms can they become effective.
Note: Governance is not about making reports look polished, but about ensuring decisions are evidence-based and accountable.
6. Entry Points for Accounting Firms
Accounting firms can assist organizations in translating HR data into manageable financial and governance language, while establishing reviewable internal control processes.For management, the focus is not on “driving turnover as low as possible,” but on making risks predictable, controllable, and improvable.
In other words, it is not about “helping you retain people,” but about identifying where leakage occurs, how costly that leakage becomes, and how it should be addressed.
When companies are able to quantify and institutionalize workforce risk, personnel costs shift from being an uncontrollable source of anxiety to becoming a manageable strategic resource.
Note: Management only becomes truly effective once workforce risks can be quantified.
Yaofeng CPA Firm has consolidated the key points of this article into the “HR Risk and ESG Governance Assessment Toolkit for the Job-Hopping Wave,” designed to help companies review turnover risks, key position backup arrangements, and personnel cost structures using consistent definitions. If you wish to further translate the assessment results into reviewable internal control systems and governance processes, our firm can also assist with implementation and evaluation.
Resource Download
➡️ HR Risk and ESG Governance Assessment Toolkit for the Job-Hopping Wave
References
- IFRS / ISSB (sustainability-related risk disclosure frameworks and their linkage with enterprise risk management)
- GRI Standards (disclosure frameworks for employment, occupational health and safety, diversity and equality)
- ILO (labour rights and occupational safety and health frameworks)
- OECD (corporate governance and human capital research)
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