Businesses lose employees for a variety of reasons. Some leave after the onboarding and training process fails, and some find that they weren't the right fit for the job in the first place. Still others depart for greener pastures in an economy that's starting to heat up again.
Many companies put more effort into hiring replacement employees than retaining their current staff, believing it's the most economic choice. After all, established employees will have higher salaries than new hires. However, a recent study from the Center for American Progress (CAP) shows this just isn't the case.
The cost of replacing your employees can add up quickly--and, in most cases, it far outweighs any savings you might realize from hiring a new employee at a lower salary.
How employee turnover adds up
If an employee quits and you hire someone new at a lower starting salary, you're saving the difference between the lower and higher salaries. However, you're also losing money in a number of areas--the most significant of which is productivity.
In addition to the lost time while the position is vacant during the recruitment process, there's also the training period. Getting a new employee up to speed to replace even mediocre employees requires a significant investment of time and resources--and in some industries it can take a long time for that employee to generate enough ROI to cover any savings you realized from the lack of investment in the original employee.
According to the CAP study, the average costs to replace an employee are:
Tips for reducing turnover
To keep your employees on board and improve your human resources budget, you need to make the right hiring choices from the start. When your new employees are well suited to your company, your turnover rate will fall. One way to ensure a good fit is to engage a staffing agency that specializes in the skill sets you need for your open positions.
Strong retention strategies are also essential for keeping your employees on board. While targeted recruitment can and should be considered part of retention, you may also consider offering your employees incentives beyond money, such as flexible time off and personal on-the-job time. Stock shares and profit-sharing programs are excellent benefits that help employees feel invested in the company.
A company is only as strong as its employees. By making good hires, creating smart retention strategies, and remaining open to salary and benefit negotiations, you can save time and money in both the short term and the bigger picture.
If you are looking for experts with experience in the Houston TX area, contact Clearpoint to help you develop your employee management strategy today!
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