Three Easy Ways to Curb the High Cost of Employee Turnover
Did you know that, according to the US Department of Labor, each year nearly one out of every four employees in this country voluntarily quits their current job? And while change may lead to greener pastures for departing employees, it creates a sea of red for spurned employers who are left with the expensive process of replacing them.
For small business owners, the loss of a key employee can be especially expensive.
In fact, recent research shows that small business owners estimate the cost of replacing an employee at close to $6,000.1 The single largest expense from an owner’s perspective is the time it takes to get a new employee up to speed and productive in a new position.
Factor in other costs such as time spent interviewing candidates, lost productivity, posting the position, training a new hire and the costs are actually two to four times greater than most business owners expect.
So what steps can a small business owner take to curb the high cost of employee turnover? The following are three to consider:
1. Offer Benefits That Meet or Exceed Those Offered by Larger Companies
In the past, offering a benefits package that’s on-par with bigger companies has been a huge challenge for small business owners. But thanks to a growing number of vendors that are focused exclusively on the small business market, this is rapidly changing. By searching the web, small businesses are increasingly able to find low-cost and easy to administer healthcare and retirement programs that fit their budgets. Healthcare Savings Accounts (HSAs) and new online 401(k) providers are making a big difference for many savvy businesses with one to 50 employees. Sit-down with your bookkeeper or CPA and you’ll also come to realize that many employee benefits also deliver relief to employers via tax credits and deductions.
2. Leverage Profit Sharing/Matching 401k as an Incentive to Stay
The best employees are the ones that keep an eye on growing the overall business and not just collecting a paycheck. To keep these folks in the fold it’s important to provide tangible incentives that reward their personal contributions on the job. With this in-mind, consider offering a profit-sharing program that demonstrates “when we do well as a company, you’re going to be rewarded too.”
Offering a 401(k) is a very attractive benefit. Not offering a plan can lead an otherwise-happy-employee to leave. In fact, nearly 40 percent of employees said they would leave their current job if offered a similar one that offered a 401(k).1
So let’s do some quick math. Experts estimate it costs 29% to 46% of an employee’s annual salary to replace a departing worker.2 401(k) plans for companies typically cost less than $1,200 a year from new online providers. So even on the low-end of a 30% of salary replacement cost, just keeping one valuable $50K a year employee (that costs $15K to replace) could easily cover the cost of a 401(k) plan for about 13 years or provide more dollars for profit sharing.
3. Providing Perks and Creating a Work Environment Advantage
While providing great benefits can go a long ways in attracting and retaining top employees, there are other creative ways that can help. Other items that ranked high among employee benefits beyond healthcare and 401(k) plans are flex-time and free parking. These are perks that can make your employees lives easier during busy times.
As employers know all too well, the best solution for one employee isn’t always the same for another. It’s always great to continue approachable and friendly lines of communication that many small businesses are known for. Whether it’s a brown bag lunch with all of your employees or a one-on-one coffee, look for ways to encourage dialogue and ideas. And once you have them in-hand, do the research to see if they are doable and within your budgets.
In the end, you may not be able to keep all of your valued employees for the duration of their careers but, with some simple proactive measures you’ll be in a much stronger position to make compelling cases to stay and, achieve better footing for reducing the search for new talent.
Stuart Robertson is general manager of ShareBuilder Advisors, LLC that operates ShareBuilder401(k); a subsidiary of ING DIRECT.