Some business owners may wonder if developing workplace culture, employee benefits, and boosting employee satisfaction in the name of employee engagement and retention is truly worth it. After all, these things cost time and money to implement, and often don’t come cheap. But oftentimes, not investing in these things has its own price – a price potentially even more costly to the business.
Employee turnover costs
According to a Manulife study, the cost of employee turnover is on average around 40% of an employee’s salary. The cost breakdown is as follows:
- Lost business due to disruption upon employee turnover
- Unused vacation payout
- New employee recruitment costs
- Training costs
- Cost of new employee errors
What’s more, employee turnovers cost percentages increase linearly according to job complexity, specialization, and required training/education. C-suite and executive-level positions often have the highest turnover salary percentage costs, coming up to a whopping 213% of their annual salaries.
Most businesses don’t budget or account for all of the costs of employee turnover, and yet that turnover is costing Canadian employers billions in hidden lost revenue every year.
Indirect employee turnover costs
We’ve shared some of the direct costs that come with employee turnover, but it doesn’t stop there. Employees coming and going can bring indirect costs to employers as well:
- Impact on employee morale
- Lost institutional knowledge
- Risk of former employees leaving for direct competitors
- Workplace gossip and speculation
- Frustration from employees who have to take on extra workload
- Time and energy colleagues must invest in retraining new hires
What is Presenteeism in the Workplace (And How is it Affecting Your Business)?
Employee turnover may be affecting your other employees as well.
What causes employee turnover
A certain level of employee turnover is always inevitable. Some employees retire or switch career paths; other employees may leave to pursue families, or to move abroad, or a myriad of other reasons.
These type of motivations aside, oftentimes employee turnover is caused by a lack of employee engagement and lack of strong workplace culture. Those aren’t just buzzwords! There is often the belief that offering higher salaries will increase employee loyalty and incentivize them to stay with the company. And while salary does factor into attracting and retaining talent, even over-compensating your employees won’t make up for a poor work environment. Top reasons that employees cite for leaving their companies include:
- Lack of employee benefits
- Not enough paid vacation time (or the inability to take that vacation)
- Not feeling valued
- Lack of career advancement opportunities
- Meaningless work
- Inflexible work environment
Did You Know…?
55% of employees would be somewhat likely to accept a job with lower compensation but a more robust benefits package. (Aflac)
How to reduce employee turnover
Employers can help reduce employee turnover rates, bolster employee morale and loyalty, and establish a strong workplace culture through the implementation of several key practices:
- Competitive employee benefits packages
- Internal opportunities for professional and personal growth
- Flexible working conditions if possible, such as work from home options and flexible hours
- Employee appreciation, such as feedback and events
- Best hiring practises (are your hires the best fit for you?)
- Exit interviews to find out why employees are leaving
5 Ways to Prevent Top Employees From Leaving
Here are 5 tips on how you can minimize employee turnover.