In a society in which job-jumping has become the norm, employers are routinely confronted with the attendant challenges arising from increased employee turnover. Among the challenges presented are also opportunities to understand the cost of turnover, pinpoint potential sources, and implement best practices for preventing employee turnover.
Employee turnover costs are subject to substantial variation, undoubtedly a reflection of the fact that average turnover costs fluctuate by wage and employee position. The Society for Human Resource Management (SHRM) estimates the average replacement cost of a salaried employee to be six to nine months’ salary. For an employee earning $60,000 per year, that totals approximately $30,000 to $45,000 in recruiting and training costs. Other studies have estimated this figure to be significantly higher — as much as twice the employee’s annual salary, especially for high-earner or executive level employees.
In short, there is no one-size-fits-all method for an employer to conduct its own turnover cost analysis. However, there are many common factors to impute into the equation:
Now that you have an idea of the costs involved the question then becomes, what are some of the best practices an employer should utilize to retain talent? The non-exhaustive list includes:
Typically, when most people consider employee turnover, the first thought that often comes to mind is the lattermost retention factor — pay and benefits. According to Robert Half, 38% of employees leave their employment as a result of inadequate salary and benefits. Consequently, the importance of salary benchmarking cannot be understated. Human Resources personnel should perform annual market assessments and salary comparisons which take into account a multitude of relevant factors — geographical location, company size, industry standards, education and position level, etc. — in identifying the market rate and generating a salary range for each position.
With mounting financial pressures and the ever-increasing cost of living, it is unsurprising that higher paying positions are more attractive to job candidates. However, higher salaries alone will not resolve the predicament of employee financial stress and dissatisfaction if the cause of these issues is rooted in insufficient financial discipline.
To that end, many employers have implemented a financial wellness program as a component of their employee benefit package in an effort to retain employees who might otherwise leave the company in pursuit of increased income. Indeed, financial wellness programs serve the dual purpose of enhancing an employer’s benefits package and educating employees on effective money management strategies. By assisting employees with their financial management and goals, employers can help decrease stress and improve the chance that employees who might otherwise decide to resign from the organization for more money will continue their tenure with the company.
A recent survey by the Society for Human Resources Management (SHRM) reported 94% of leaders feel employee engagement is an important or very important workforce challenge. An engaged workforce increases operational income by over 19%, while a disengaged workforce can drain over 34% of an organizations’ operational income. Additional risks of low engagement can be seen in increased turnover, low customer satisfaction ratings and even increased employment litigation.
Employee retention continues to be a top concern for employers, even more so than last year, according to a PayScale survey of more than 4,000 executives and human resources professionals.
In 2014, a staggering 59% of employers were more concerned about retaining talent than anything else. Five years ago, only half of those employers thought retention was their number one concern.
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