Best-selling business management author Jim Collins was asked during a 2001 interview if he had identified a good business response to the economic slowdown that had gripped the nation. His widely quoted answer is as relevant today as it was at the time:
“If I were running a company today, I would have one priority above all others: to acquire as many of the best people as I could [because] the single biggest constraint on the success of my organization is the ability to get and to hang on to enough of the right people.”
Nearly 20 years later and in a highly improved economic climate, Collins’ words still encapsulate the biggest challenge facing HR departments of corporate giants and small start-ups alike: finding and retaining quality team members. In an era of competitive recruitment and job-hopping staff, your company risks losing monetary and human capital each time a valued employee chooses to leave. Employee turnover impacts your bottom line and your company’s culture. To set wise employee retention policies, you first need to assess the costs of staff turnover accurately and measure the full impact of employee loss.
Direct Costs of Replacing Employees
A talented employee exiting your company costs you money. Estimates of how much employee turnover costs can vary by industry and employee salary. A study by Employee Benefit News estimates the direct cost to hire and train a replacement employee equal or exceed 33% of a worker’s annual salary ($15,000 for a worker earning a median salary of $45,000). Cost estimates are based on calculatable expenses like these:
- HR exit interview & paperwork
- Benefit payouts owed to the employee
- Job advertising, new candidate screening & interviewing
- Employee onboarding costs
- On-the-job training & supervision
Full Impact of Employee Loss
Josh Bersin, a human resource researcher, writing for LinkedIn, refers to employees as a business’s “appreciating assets.” Good employees grow in value as they learn systems, understand products and integrate into their teams. When one of these valuable employees leaves, the business loses more than just the cost of hiring and training a replacement. Bersin cites these additional factors contributing to the total cost of losing a productive employee:
- Lost investment: A company typically spends 10 to 20% of an employee’s salary for training over two to three years.
- Lost productivity: A new employee takes one to two years to reach the level of an exiting employee. Supervision by other team members also distracts those supervisors from their work—and lowers the team’s collective productivity.
- Lost engagement: Other team members take note of employee turnover, ask “why?” and may disengage.
- Less responsive, less effective customer service: New employees are less adept at solving customer problems satisfactorily.
According to Bersin, studies show the total cost of an employee’s loss may range from tens of thousands of dollars to 1.5 to 2 times that employee’s annual salary.
Strategies to Slow Employee Turnover Rates
An effective exit interview helps you and your HR team pinpoint the drivers of your company’s employee turnover. You may find that hiring practices need to be refined or employee engagement should be enhanced. Changes to the break room space, such as fresh fruit or games, will allow your employees to relax and come back to work with fresh eyes and a better attitude. This will keep up the workplace morale, shaping your company culture to include perks appealing to younger workers and will lead to increased job satisfaction. Today’s employees are career-oriented and highly motivated. Keep them on your team with other opportunities such as:
- Pathway for advancement within the company
- Professional development & advanced education
- Flex-time & work-from-anywhere options
- Management support & recognition
- Lifestyle rewards or amenities like catering & concierge services
- Culture of shared values & volunteerism
Add Student Loan Benefits Through ELFI
Student loan repayment tops the financial-worries checklist of many recent graduates. Older team members question their ability to pay for educating their children. New, highly desirable HR benefits like student loan contributions and financial literacy education are emerging from these employee concerns—and ELFI for Business is leading the way for employers to incorporate them into hiring packages. You can connect with ELFI directly from your HR portal and access multiple ways to contribute to employees’ student loan debt. We offer new-hire onboarding booklets, educational newsletters and onsite consultations filled with information for you and your employees. Reach out to us at 1.844.601.ELFI to add cutting-edge benefits to your HR employee package!
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