You might think that your organization would be better off letting employees leave so that you can hire new team members at lower salaries, reducing your expenses along the way. You’d be wrong. It actually costs a lot more to hire new employees than retain your existing ones — even if those folks draw ever-increasing salaries.
The Cost of Replacing Employees
Swapping employees is nowhere as easy as it sounds. Organizations that are searching for new employees have to devote resources to recruiting and interviewing. When a candidate is finally chosen for the position, they then have to spend time onboarding that individual. Not only does a new hire spend their time learning how to do the job instead of actually doing it, but managers also have to devote their energies into getting rookies up to speed.
If that weren’t enough, organizations are forced to do all that while incurring productivity losses until the new hire can produce at a high level. According to the Center for American Progress, this all translates into serious costs:
For jobs that pay $30,000 or less, it costs businesses 16.1% — almost $5,000 — to replace an employee.
For jobs that pay $50,000 or less, it costs businesses 19.7% — nearly $10,000 — to replace an employee.
For jobs that pay $75,000 or less, it costs businesses 20.4% — more than $15,000 — to replace an employee.
Notice a trend here? Data isn’t available for jobs that pay more than that, but you can safely conclude that the more an employee is paid, the more it costs to replace them. Altogether, the average company spends 12% of its pretax income on rehiring and training new employees, according to an infographic on retraining employees from Mindflash. For companies that are impacted by turnover the most, that number jumps to a grotesque 40%.
Keep Them Around By ...
Since it’s way more expensive to hire new employees than retain your existing ones — even if you give them hefty raises — how exactly can you go about convincing your team members to stick around?
1. Giving them a raise
According to our Employee Engagement Report, nearly 25% of employees would leave for another position that pays 10% more. Seeing as the cost of replacing employees is almost certainly more than 10% of their salaries, you’d be wise to pay up to match the increase in living wages.
2. Recognizing employee efforts
Our report also found that less than 33% of employees feel valued at their jobs. To increase the likelihood employees will stay put, work on improving that statistic as much as you can at your organization. An easy way to do that is by embracing employee recognition and expressing gratitude to your amazing workers on a regular basis.
3. Investing in professional development
Another finding from our report revealed that only 25% of employees feel as though their organizations provide ample opportunities for professional development. Employees — and particularly millennials — will stick around if you make professional development a top priority.
The longer your employees stay put, the better they’ll be able to serve your customers because they’ll know your operations inside and out. For this reason, employee retention should be one of your organization’s core points of focus.