The Cost of Replacing Employees
For businesses to thrive in today’s economy, finding and retaining the best employees is important, especially for small businesses and nonprofits who have to compete against larger companies. Frequent voluntary turnover has a negative impact on employee morale, productivity, and company revenue. Plus, recruiting and training a new employee requires staff time and money. It should be the company’s goal to keep their employees happy.
But what is it that makes employees happy? The answer is simple. Benefits. Employee benefits are the non-cash compensation provided at the discretion of the employer, to each employee during their time with the company. Benefit packages will vary from company to company and will usually include medical insurance, life insurance, paid vacation, and retirement benefits, among other things.
There are many studies on the cost of employee turnover. Some studies (such as SHMR) predict that every time a business replaces a salaried employee, it costs it costs them 6 to 9 months of that employee’s salary. For example, to hire a manager making $40,000 a year, it would cost the company $20,000 to $30,000 in recruiting and training expenses.
But others predict the cost is even more — that losing a salaried employee can cost as much as twice their annual salary, especially for a high-earner or executive-level employee. Turnover will vary by the wage and the role of the employees for each company. But it is very hard to predict the true cost of employee turnover because of the many intangible and often untracked costs associated with employee turnover.
It is also important to understand the subsequent intangible affects the company feels, such as a decrease in productivity and the impact on the morale of the remaining staff. To avoid the negative impact turnover will have on your business, there are things that can be done to help minimize it:
- Don’t assume employees are happy (create a feedback environment)
- Benchmark your employee retention rate
- Personalize employee benefits
- Conduct exit interviews with exiting employees
Please note, that sometimes turnover can be beneficial to an organization if it leads to the right individuals leaving and it makes the organization more agile and adaptable to a rapidly changing business environment. Sometimes the key issue is not about how often it occurs but who leaves and who stays.
Vest offers an employee financial wellness benefit to help with engagement and retention. According to a study by MetLife, employees who are satisfied with their benefits are 4 times more likely to be satisfied with their employer. According to that same study, 62% of employees look to their employers for help in achieving financial security through employee benefits. If you are not currently offering a financial wellness benefit to your employees, now is the time to take action.