Over the past 18 months, we’ve all read or at least seen the news about the 'Great Resignation'. Although job-hopping began many years in advance of the pandemic – the trend was predominantly found in younger employees. Recently, what has been particularly disruptive for organizations, is the rising resignation rate (over 20 percent since the pandemic began) of mid-level employees (ages 30-45). According to the U.S. Bureau of Labor Statistics, a whopping 4.4 million people voluntarily quit their jobs this past September and they are predicting the numbers will continue to increase. In fact, a recent PWC study found that 65 percent of employees were looking for a new job in 2021.
Let’s dive into why it’s so important to minimize employee turnover in today’s market.
Employee turnover lowers morale
Having close relationships at work is a critical component to overall employee satisfaction and wellness. So, when a “work friend” leaves an organization, the result can be subtle disengagement and a lack of commitment to an organizations’ success.
Employee turnover decreases productivity
When an employee leaves an organization, the direct result is a loss of productivity. Not only is this because fewer people are doing the job, but the ones who remain are forced to make up for the loss and often become stressed and burnt out. Studies show, taxed/stressed employees exhibit 60 percent higher absenteeism and are significantly less effective when they're at work.
The cost to the organization is high
Analysts predict that every time a business needs to replace a salaried employee, it costs an average of 6-9 months of the salary.
Why is the cost to replace an employee so high?
In 2013, Josh Bersin, Global Industry Analyst, published an article that foretold the biggest problem employers were going to face in the future: employee retention. In the article, he outlined the following costs involved in replacing lost employees:
- Recruiting costs: The cost of hiring a new employee includes advertising, interviewing, screening, and hiring.
- Onboarding costs: The cost of onboarding a new person, including training and management time.
- Lost productivity: It may take a new employee one to two years to reach the productivity of an existing person.
- Lost engagement: Other employees who see high turnover tend to disengage and lose productivity.
- Customer service and errors: New employees take longer to complete their work and are often less adept at solving problems.
- Training costs: Over two to three years, a business likely invests 10% - 20% of an employee's salary or more in training.
- Cultural impact: Whenever someone leaves, others take time to ask why.
Now that you know the repercussions of employee turnover, you need to know how you can combat it. Here are five easy ways employers can retain top talent during the 'Great Resignation', coming from an industry expert with over 20 years of insight.
- Pay: First and foremost, employers need to ensure they are paying their employees a competitive wage. You can offer employees all the bells and whistles of a great workplace, but if they are not being paid appropriately, more often than not, they will be tempted, or maybe even forced to make a change. Let’s face it- the number #1 reason people work is to keep a roof over their head in a job that will provide career and financial advancement.
- Benefits: In the 1980s, 83 percent of private sector companies provided a defined benefit retirement plan versus just 17 percent in 2018. These types of plans certainly helped to ensure employee retention, loyalty, and commitment. In the ‘90s it was all the rage to offer equity/stock options. Without these types of plans or incentives today, employees are almost being forced to go to “the highest bidder”. Employees are seeking organizations that offer them benefits that include PTO, health insurance, retirement plans, etc.
- Flexibility/Work-Life Balance: According to a recent article in Bloomberg, beginning in the ‘70s, employees have been expected to do more, while wages and benefits have remained stagnant. Many companies, pre-COVID, offered either fully remote or hybrid work options to both reduce company costs while offering more of a work-life balance to their employees. If there is anything positive that has come out of the pandemic, more and more companies are recognizing that if work can be accomplished in a remote setting and there is no loss of productivity, offering remote or hybrid work is no longer a luxury reserved for higher wage earners but should be embraced and managed.
- Career Path/Advancement: Opportunity for advancement is one of the most important elements in retaining employees and building employee loyalty. Some examples are expanding employees’ skills sets, giving them additional responsibilities that lead to evolution or a changing of their roles, acknowledging accomplishments through raises and promotions.
- Show Gratitude – “A person who feels appreciated will always do more than what is expected”: Much like one’s personal life, an employer-employee relationship is a two-way street, requiring effort from both parties. Yes, the employee is being paid to do the work, however, managers need to show gratitude, appreciation, and give thanks for a job well done.
In conclusion, an organization’s greatest asset is its employees. If you want to maintain/ increase profits and a competitive edge, companies must put their employees first or, you will lose out.