Every company wants to retain their talent. There are obvious costs when someone leaves the company, including recruiting and training costs and the sometimes overlooked costs of other team members taking on more work until the new person is up to speed.
Ideally companies should to have no more than a 10% turnover rate. If that is your company, congratulations! If your company’s turnover rate is higher, it is important to take a deeper dive into who is leaving. Clearly some will move on because of financial reasons, taking a position that provides more income. Some may decide that there is more opportunity for career growth with another company. Others may feel that the corporate culture is not a good fit or that they felt marginalized. In any of these scenarios, there is a cost.
When we talk about employee health and well-being, it’s often more about personal physical and mental health, benefits costs, or building resilience. However, the health of the company’s culture is also a part of workplace health and well-being. Looking at where the work culture could be causing a turnover issue and targeting efforts for that group of people can potentially positively impact turnover numbers.
SHRM calculates that the replacement cost for an employee is somewhere between 25% to 50% of the annual salary for that position. Looking at the salaries and the number of people that have left the company in the past year can give your organization a baseline of what those costs are. To get a more complete picture, companies should look at least the past two years, including who left and what positions and departments or locations they were in. This can give HR a better picture of whether or not there is more turnover in one area of the company versus companywide. You can also look at how many men versus women chose to leave and, if you have the data, if there are more people leaving from a diversity perspective.
No one wants to find out that someone in the same position, doing the same work, is receiving more compensation or recognition. Not only is this an issue in terms of their own financial stability and financial wellbeing, but it is also a demoralizing message. In the U.S., it is somewhat taboo to share salary information with another employee, but younger employees tend to be much more transparent and open to sharing that information. Making sure there is true pay equity for all positions sends a clear message. If this has been an issue in your organization, taking the time to communicate the company’s commitment to pay equity is important. It also must be more than a statement. It requires sharing some data to back it up to build trust and loyalty with employees. Your company may be doing a good job with pay equity. You may have a great program for financial wellbeing. Making clear that pay equity is part of that financial wellness initiative is important. Pay equity means that everyone can contribute to their retirement savings in an equitable way, so ties into your financial wellbeing initiatives. It also clearly says that it is the work and contribution that is valued for all employees, regardless of age, gender, race or any other differentiator.
With an aging workforce across the U.S., this is another area of focus to help reduce costs in the future. Ageism is a bias that has not shifted in 20 years and yet 25% of the U.S. workforce is now 55 or older. There is a view that older workers will cost more, be looking for the same advancement opportunities as an employee that is 35. Some forward-thinking companies are working with more mature employees to keep them engaged and find out what they want. Some may want to scale back and work part-time, reducing costs and retaining their knowledge base. It also helps them continue to have financial security. As a society, we have succeeded in lengthening our lifespan, so there will be people that will want to work into their 60s and 70s. Older workers also typically have a longer retention rate than someone in their 20s.
Both approaches tie into financial well-being and can help reduce turnover and recruiting costs. There are others, but ageism and pay equity are two that often aren’t addressed in meaningful ways. When employees stay, their teams have more stability and are not taking on a larger workload until a new team member is hired and up to speed. That can reduce a lot of stress on the team. That can help reduce costs related to mental health. Reducing turnover also reduces stress on HR teams. Less time doing exit interviews and recruiting means more time for other projects.