Employee Retention Is Better for Business
The staggering annual cost of employee disengagement is approximately $450 billion! It turns out that a low employee retention rate is a major contributor to this amount and links to a case study analysis which explored the cost of having to replace employees, whether they leave of their own accord, or otherwise. In their analysis, the researchers found that businesses spend nearly 20% of an employee’s annual salary to replace them. Some of you reading this might not know whether to laugh or cry at this finding.
What is the cost of low employee retention?
To be replaced, it costs an organization nearly 20% of an average employee’s annual income. The expense to replace individuals who occupy highly trained, specialized positions is even greater. In a recent Huffington Post article, it was discussed that the loss of a Millennial employee alone could cost between $15,000 and $25,000. But why is it so expensive?
• Using a recruitment company and placing job advertisements add an additional, sometimes unforeseen cost.
• Potential candidates still need to be interviewed and vetted, which takes time – another precious resource.
• New recruits require training, which comes at a price. Employers spend the equivalent of six to nine months of an employee’s salary to find and train their replacement.
• Onboarding takes time and resources. New hires often take up to two years to reach their best level of productivity. The cost of employee replacement is high, but the often overlooked are a company’s resources, including their time and manpower.
Replacing employees is expensive. What is the solution?
Many employees who have not been let go for violations or retrenchments, leave their jobs due to dissatisfaction with their job descriptions, job recognition, managers, and/or working environment, or to find employment that offers a better salary and benefits and general greener pastures. Research by the Daniel Kahneman (Nobel Prize winning psychologist) and Angus Deaton found that the so called “magic number” when it comes to income and happiness is as follows: Beyond receiving a household income of $75,000 a year, money “does nothing for happiness, enjoyment, sadness or stress.” Further to this, Kahneman said that, “It’s not so much that money buys you happiness, but that lack of money buys you misery.” Although, “[t]he lack of money no longer hurts you after $75,000.” And given that people spend more than a third of their lives at work, a happy (read: satisfying) working environment means a lot more to people than necessarily what they earn.
Organizations need to do more when it comes to employee retention and facilitate a working environment that fosters open communication between employees. One that recognizes employees’ efforts and accomplishments, and one that values employees’ personal wellbeing. Look no further than Ezzely for a solution that will allow your organization to attract, recognize, retain, review, train, and reward employees.