The Cost of Employee Turnover and How to Lower It By Keeping Your Best Workers
Employee turnover creates headaches for companies. You have to deal with the inconvenience of adjusting processes and projects and taking time to find and hire replacements. Meanwhile, your remaining employees have to shoulder extra tasks (and added stress) until the replacement gets onboarded and trained.
Also, when someone quits your company, it costs you money. Replacing workers in Canada costs $30,674, on average. This amount includes the expenses related to recruiting, hiring, and onboarding and the lost productivity due to the employee leaving. The costs can be significantly higher when managers or C-suite executives leave a company.
Yes, you’ll have to deal with some employees leaving and factor the cost of recruiting, hiring, and training into your budget. However, you can take steps to reduce turnover. And no, these steps do not have to include salary increases or bonuses that strain your finances.
Here is a closer look at employee turnover, its costs, and how to avoid it.
How Much You Lose When Employees Quit Your Company
As mentioned, $30,674 is the average cost for all workers, managers, and executives.
A more precise way to figure out the costs is as a percentage of the salary. Why? Salary usually increases with skills, experience, and training. A highly skilled senior worker or experienced executive commands a higher salary, and you’ll have to invest more in recruiting or training a qualified replacement.
If you think about it, calculating costs as a percentage of salary makes sense. Entry-level workers do not require much training. Hiring is also easier because you don’t have to find someone with specialized skills or experience. However, technical workers or decision-makers often have years of training and experience. Also, losing these experts often has a bigger impact on productivity.
Here are the percentages that illustrate the average costs for employee replacement.
- 30% to 40% of the annual salary for entry-level workers
- 150% for experienced, mid-level employees
- Up to 400% for highly skilled workers or executives
The average for voluntary turnover in Canada is 11.9%. Even for entry-level workers, the costs add up. If you lose 11 of 100 employees making $30,000 per year, that’s 11 x $9,000 (30% of $30,000) or $99,000 per year in employee replacement and lost productivity costs.
On the other hand, one highly skilled technician or executive making $250,000 could cost $1 million or more to replace.
When you do the math, it’s pretty obvious that you need to do everything you can to keep employees, especially skilled and experienced workers, in your company.
Strategies for Employee Retention
Sometimes, it might seem impossible to keep good employees. You might worry that you can’t compete with the salaries larger companies offer or that skilled workers will want to pursue senior roles in more famous or cutting-edge corporations.
The good news is that keeping employees with your business is not just about dollars and famous company names. Other things matter, too.
Here is a look at three areas, other than salary, that can help you keep your employees.
Offer Professional Development
Offer professional development opportunities to current employees. Employees want to feel supported in their career ambitions. More than half of Canadian workers participate in such programs. A survey found that 70% of workers would consider moving to another job if it offered better professional development opportunities than their current employer.
You could offer support for accreditation and certification exams. This can involve feeding prep courses or simply giving workers time off to study and take exams.
Professional development opportunities let you show your workforce that they aren’t simply cogs in your machine. You support their careers, goals, and ambitions.
Foster a Positive Workplace
Here’s one area where you can stand out. About 40% of employees say there is a disconnect between the culture their employer claims to have and their actual work environment.
You can build a workplace culture that actually creates an employee-friendly atmosphere. In addition to supporting professional development, you can take time to publicly recognize good work or exceptional effort.
Another step is to create policies that ensure a healthy work-life balance. Consider offering your employees the chance to work remotely if possible, and make sure they take their full complement of vacation and personal days each year.
One final step is to give employees a forum where they can communicate concerns or needs without worrying about criticism or retribution. Also, clearly define the steps that employees can take to get support and notify leadership about problems.
Focus on Benefits
As we pointed out earlier in this section, employee satisfaction isn’t all about money. You can use benefits to help your staff achieve financial stability, have good healthcare, and enjoy a high quality of life.
Benefits can come in different forms. You can offer workers retirement accounts, health insurance coverage, paid time off, and other perks.
Some retirement account options, like group registered retirement savings plans (GRRSPs), allow the company to match employee contributions. You can help employees save for retirement by making taxdeductible contributions to their accounts. In other words, you’re supporting your workforce by helping them build long-term financial stability.
Employee benefits plans help ensure your workers have the healthcare they need for themselves and their family members. You can choose plans that offer comprehensive coverage and provide support for wellness, fitness, and other health-related activities that can improve employees’ quality of life.
Find the Right Partners for Your Employee Retention Efforts
Your employee retention efforts could backfire if you do not execute them correctly. We’ve already mentioned the 40% of workers who said their company failed to deliver the positive workplace culture they promised.
The same problem could occur if your benefits packages or retirement plans don’t actually provide the expected coverage or financial services or if your professional development courses don’t actually lead to skills improvements. It’s essential to find proven, reliable partners who can help you carry out your plans.
For health coverage and GRRSPs, that partner is the Kropman Group. You can speak with one of our benefits specialists to learn more about your options.