In the business world, it's widely known that it costs more to find a new customer than to retain an existing customer. But is the same true for employees?
Businesses small and large have made great efforts to retain existing customers for the benefit of their bottom line, but have yet to implement these actions internally. You may not realize how much your small or mid-sized business is spending to replace employees when a simple, cost-effective solution is available.
The true cost to replace an employee
While specific values may vary depending on the kind of business, the Work Institute conservatively estimates that it costs U.S. businesses $15,000 to lose a single employee and replace them. Using this number alongside the voluntary turnover rate, they found employers lost $617 billion to employee turnover in 2018 alone.
Employers know that it's expensive to replace employees – the available data from the past decade fully supports this – yet voluntary, preventable turnover rates are still high. This flat-out cost doesn't even include the ripple effect replacing an employee can have on a business.
In small, specialized businesses, like medical practices, the cost to replace a single employee is also increasingly measured by intangible aspects. Employees hold the knowledge that helps your organization operate efficiently on a daily basis. When one leaves, not only does it interrupt workflow and damage company morale, but you will need to spend more time instilling that knowledge to a new employee.
Determining the cost-per-hire
If you're trying to determine how much replacing an employee could cost – or has already cost – your business, Glassdoor breaks down the cost-per-hire into two categories:
External recruiting costs
- Job sourcing
- Job boards
- Pre-hire assessments
- Background checks
Internal recruiting costs
- Internal recruiters
- Referral awards
Of course, this doesn't include how much time is spent on replacing an employee that could have been used for more productive means. Research from Hundred5 found that small business owners end up spending around 40% of their working hours on tasks that do not generate income, such as running the hiring process to replace an employee. Not every business will have the same hiring expenses, but small and mid-sized businesses will especially feel the impact losing an employee has on daily operations.
While many researchers are able to pinpoint the cost to replace an employee, depending on their wealth of knowledge and expertise, they could be priceless to your organization.
Use benefits and perks to retain employees
One of the best ways to combat high employee turnover in your own business is by re-evaluating your employee benefits package. Of course, some employee turnover in business is normal. Employees retire, move or need to change their career. The problem is when employees leave to seek greener pastures elsewhere, and take the experience they have gathered from your business to benefit the work of a competitor.
Interestingly enough, the same study from Work Institute found that 76.8% of all turnover was controllable in 2018, and this pattern will most likely continue in future years unless action is taken. If employers aligned interventions with their retention goals, these numbers might have told a different story.
According to Clutch, employee perks and benefits can be used to retain employees, yet only 47% of small businesses currently offer them to employees. Most businesses offer healthcare and retirement benefits, but today's workforce, made up of different generations with different desires, means that a one-size-fits-all approach to perks will never appeal to every employee.
The U.S. Chamber of Commerce recommends utilizing tailored benefits, which are more cost-effective than you may think. A new approach, called consumer-directed benefits, may be just what your business needs to connect workers with reliable, convenient perks and resources that will keep them engaged at work and help improve your business' retention rates.
Offer your employees the best by becoming an Exectras Member
When you become an Exectras Member, not only do you get access to Fortune 500 business services at discounted rates, but you can offer a unique menu of perks to your employees at no extra charge. A small monthly fee can help you save money on services while providing some of the most sought-after benefits to your employees.
The more services and benefits you use, the more valuable the program becomes. Since the membership fee is based on the number of employees you have, you can be assured you are only paying for the services you need. Your employees will be able to choose the perks that appeal to them and you can focus on what's more important to you: running your business.
Contact us today to learn more about how you can benefit from an Exectras Membership.