The recruiters at CulverCareers know better than anyone how impactful the right employee team is at an organization. Along this line of thought, it can be quite alarming when you assess the real cost of employee turnover. When your business loses a key team member, the impact is felt throughout the organization.
According to Forbes, “The reality is that regardless of the size of your business, employee turnover is a major concern. Whether it’s because of cutbacks or employee dissatisfaction, if it becomes a frequent occurrence, it can have serious implications for your business.”
At Culver, we have seen first-hand the negative effects that ripple across an organization with the loss of executive leadership. Importantly, when business leaders spend enough time at a business, their personalities become a part of the overall brand. When such people leave your business for another job, it is very challenging. At this point, not only does your company need to revision itself, but it also needs to take decisive actions in recruitment.
While the loss of executive leaders, technical hires, and salespeople will always be a huge shock to your company, less prevalent positions also pose problems. With such issues at hand, Culver wanted to walk you through some key points about employee retention. Our hope is, by helping you understand the true costs of losing key employees, we can help you avoid such situations in the future.
How Much Does Losing an Employee Cost?
Over the past years, the concept of employee retention has gained a good deal of attention from human resources experts. Interestingly, it is well known that high-employee turnover is a repairable problem. Yet, companies continue to suffer massive losses each year by overlooking critical factors such as employee engagement.
According to the Gallup website, employee turnover costs American businesses a total of $1 trillion every year. They explain these astounding figures as such, “the cost of replacing an individual employee can range from one-half to two times the employee’s annual salary — and that’s a conservative estimate.” As such, if you lose a high-powered executive that makes $150,000 per year, you can expect to pay $75,000 to $300,000 to replace them. This expense is in addition to the new executive’s salary.
While these financial estimates from Gallup are certainly helpful, it’s best to look at notions of employee retention with a more granular perspective. Namely because, the loss of a key employee is a complicated affair that has a lot of facets. This fact explains why there are such wide variances on the financial impacts of poor employee retention.
There are obvious expenses such as recruitment and training that come with the loss of team members. However, there are other less apparent expenses that will cost your business. These include:
- Loss of productivity
- Decreased engagement from other employees
- Decline in customer service
- Loss of key business relationships
- Negativity within company culture
The true cost of employee turnover be difficult to comprehend, as the effects of the loss are often felt years down the road. This notion is particularly relevant for employees who work hands-on with your clients, such as salespeople.
What is a Healthy Retention Rate?
There are a number of variables that influence a healthy employee retention rate. While national averages are helpful in gauging your company’s performance against others, you must also consider other factors that affect employee retention. These include the industry in which you do business, as well as your locale.
According to the popular job board Indeed, “The retention rate is typically the inverse of the turnover rate. For instance, if your employee retention rate is 92%, meaning 92% of the time you retain employees, then your turnover rate would be the remaining 8%, which is the difference between the retention rate the total percentage of employees (100%).”
While the figures presented by Indeed offer a great baseline for understanding retention rate basics, there is no blanket figure that is considered healthy for every industry. To illustrate, the service industry has a notoriously low retention rate, with sources showing an average of around 75%. Conversely, government jobs are renowned for high employee retention, with figures at around 98.5%. This is largely because, most government jobs come with pension plans that encourage long-term employee/employer relationships.
If you are curious how your business measures up concerning employee retention, we recommend you do some research within your given industry. After that, you can figure out your employee turnover rate by doing a bit of simple math. You must divide the number of lost employees by the number of total employees, then multiple the total by 100. With the employee turnover rate of your business in hand, you can make comparisons within your industry.
Contact Us today to discuss the importance of employee retention in your business.
How do You Retain Employees without Above-Market Pay?
There is no doubt that employee recruiting can be fiercely competitive. Especially in specialized fields such as cloud computing, employee demand by far outweighs the available talent pool. For reasons such as this, employers need to look for new and creative ways to attract and retain top talent. The good news is, the process of increasing employee retention does not always demand that you give your team members pay raises.
At CulverCareers, we recommend that you focus on employee engagement and employee benefits as means to increase employee retention. According to the organization Engage for Success, “Employee engagement is a workplace approach resulting in the right conditions for all members of an organization to give their best each day, committed to their organization’s goals and values … with an enhanced sense of their own well-being”
Importantly, employee retention problems are almost always tied to employee engagement issues. Therefore, the best way to reduce turnover at your business is to help your employees feel more engaged at work. When your employees are personally invested in your company, they will stand by you through just about anything.
A great place to start boosting employee engagement, as well as reducing turnover, is by crafting good employee benefits. By giving team members extra perks on top of their salaries, you help them feel more appreciated at work. This idea is glaringly apparent with government jobs, as retirement pensions act as catalysts for greatly reducing turnover.
Some examples of fringe benefits include:
- Health & dental insurance packages
- Flex spending accounts & health savings accounts
- Gym memberships
- Meal plans
- Company cars
- Wellness Training
- Paid vacations
Setting up good employee benefits is a great way to increase employee engagement. However, you must also track the progress of both programs to ensure they are working as designed.
Employee Benefits Surveys
Employee benefits surveys are a great way to keep tabs on how employees feel about their benefits packages. These questionnaires allow employees to provide feedback on their benefits, as well as suggest potential changes in the offerings. If utilized correctly, employee benefits surveys can help you understand where your fringe might be lacking – before the issue turns manifests as poor employee retention.
Employee Engagement Surveys
Another great way to increase employee morale and decrease employee turnover is through employee engagement surveys. These questionnaires focus on issues related to employee wellness, workplace satisfaction, and work/life balance. By tracking where your employees might be having a hard time, you can rectify problems before they lead to people leaving your organization.
Contact CulverCareers About Employee Retention
At Culver, we understand how challenging the loss of key employees can be for your business. As trusted staffing partners, we are dedicated to helping you retain your team and ensure the overall success of your business.
Contact Us today to learn more about our services and offerings.