For business owners, losing a key employee you have trained and cultivated a relationship with is always a downer—but did you know that it is something that can eat into your bottom line, too? Retaining key employees is important for morale and company culture, but it can actually be important to your business’s cash flow as well.
It is estimated that employers in the United States are losing one trillion dollars every year due to voluntary turnover, which is a staggering sum. Below, we will look into how employee turnover can possibly cost this much, and what employers can do to encourage their top performers to stick around for the long haul.
The Costs Involved With Replacing a Key Employee
Many business owners neglect to consider the true costs of losing a key employee, but it can be a pricey endeavor. Depending on the employee’s experience level and role within the company, experts report that finding and training a replacement can cost anywhere from 6 months to 2 years’ worth of annual salary. Some of the costs involved with replacing an employee include:
- Recruiting and hiring expenses
- Onboarding and training time
- Loss of productivity and engagement
- Interim time for the person filling in
- Customer service errors
- Cultural impact
- Loss of trade secrets and key customers
How Business Owners Can Retain Key Employees
Given all the negatives involved with losing key employees, it is a smart choice for business owners to be proactive about their retention policies. Setting rank-and file employees up with the right benefits, work environments, and perks can go a long way in keeping them around—and while these plans may feel like another line item on your cost sheet, when compared to the expensive price of turnover, they can actually help you save.
When designing employee retention plans, the focus should be on solving emotional and financial challenges for an employee, with deferment terms that are favorable to the employer. A few examples of this would include retirement funding, college funding, student loan repayment, home purchases, or other customized goals, deferred over a 5-10 year period to heavily incentivize the employees that stick around.
Even the best retention strategies are not cost-prohibitive to your bottom line and may create tax deductions and savings each year. These best plans are assembled to retain this benefit if the employee inevitably leaves the company, despite your best efforts, so there is no risk on the table for the employer.
If you would like to learn more about how to encourage employee retention and preserve your bottom line, we are here to help! Contact us today to learn more.