The best-performing businesses place the experience of their employees front and center. They understand their customers, systems, and processes and the little tricks that make an organization tick. Of course, a reasonable level of employee turnover can freshen up the team. But too much can harm the business, increase costs, and erode key capabilities.
Here we’ll look at the cost of employee turnover and recommend some practical steps to help managers ensure employees remain loyal to the business. We’ll also explore how Earned Wage Access (EWA) services fit into a broader compensation and benefits package to help support long-term employee retention.
First, let’s explore the costs of excessive employee turnover.
It’s always tempting for a manager to assume that employee turnover is merely an inconvenient fact of company life. However, the costs of replacing employees are very significant and impact the rest of the business.
There are multiple direct costs imposed on the business when employees decide to leave.
When someone leaves, multiple business processes kick off to help facilitate their exit. Vacation time accrued but not taken needs to be calculated. The number of regular shifts or days and overtime worked need to be checked. Any bonuses or tips someone is owed need to be reviewed. Any expenses outstanding need to be checked and approved. The list goes on, and it all takes time and costs money.
Employees leaving the business means recruiting their replacements which creates more costs for a company. Job specs have to be reviewed and approved, job adverts approved and posted internally and on the company website, as well as placed with recruitment agencies. Interviews also need to be arranged, taking managers away from their other duties. References need to be checked, and employment eligibility confirmed.
Once someone accepts a job offer, the cost of recruiting them continues to climb. Their bank account details, home address, and social security number have to be collected and entered into an HR system. Training needs to be organized for the new employee, and coaching may need to be scheduled.
While the recruitment process goes on, there are direct costs for the business, as other employees cover the vacant headcount. This situation may mean employees need to work more overtime, or the company has to hire temps. Alternatively, managers need to accept that the levels of service they provide will diminish.
Depending on the complexity of the role, it takes time for the new employee to achieve the level of performance a company needs. Even if they have been recruited from a similar position elsewhere, there are still new systems and processes to master, new relationships to develop, and a new company culture to absorb. With the best will in the world, a new employee will take time to reach the expected performance level. They’ll likely need more supervision for the first six months while they get fully acquainted with their new career.
When employees depart, it also imposes hidden costs on the business, which can be significant, although difficult to quantify financially.
Employees have skills, experience, and relationships that a company can no longer draw upon when they have left. Departing employees can disrupt fellow workers, some of whom may rethink their situation. Managers may have to review their approach to managing and hiring employees to ensure the turnover rate doesn’t become excessive.
We can all understand the costs and effort involved when we start new roles. Now think about how that cost and effort scale up when recruiting for tens or hundreds of roles. You can quickly see why reducing employee turnover is a big win for any company.
Some employee turnover is actually good. Perhaps people need to change their work-life balance or simply have skills that are better suited to other roles. For companies, an influx of new ideas and energy can be beneficial too.
That said, companies need to make sure they don’t exceed their ability to manage employee turnover. They need to stay within their capacity to manage their talent and resources without disrupting the business.
Fortunately, there’s a range of practical steps to help companies reduce employee turnover rates.
Developing a positive company culture will help reduce employee turnover. Period.
How people feel about their employer and how exceptional employee performance is rewarded, for example, contribute to reduced turnover if a management team recognizes that these matter to their employees. Empowering employees to take more responsibility in their workplace can help too, by making them feel more involved, and that they matter. While there are limits to how far people can be empowered, finding ways to show they’re not just a number to management and helping them achieve job satisfaction will go a long way to reducing employee turnover.
In parallel to a positive working environment is providing an effective work-life balance. Employees are happy to work hard during their contracted hours, but they’re also keen that their personal time is for the benefit of themselves, their families, and their friends. Make it quick and easy for people to switch shifts when they need to so that they can manage their work-life balance better.
Providing competitive remuneration and benefits packages forms part of an overall employment offer to potential and current employees. In a competitive employment market, it makes a significant difference clearly.
As well as providing a competitive salary, the focus should be on providing benefits that’ll be valued by employees and applicants alike. A great example is flexible payment models for employees, which can be really valuable for those working paycheck-to-paycheck.
People who work in hospitality, care services, or customer services, for example, who receive weekly or bi-weekly paychecks, can be more exposed to having to deal with sudden, unplanned expenditures. This might be replacing domestic appliances, healthcare costs, or childcare costs.
Pay flexibility – allowing employees access to wages already earned but not yet paid – can be invaluable for many employees and will help with retention. It removes the stress and embarrassment of borrowing from friends and family or from high-cost unsecured lenders.
It helps employees remain focused on their responsibilities rather than spending time worrying about unplanned bills. As well as helping retention, it helps to reduce sickness and unauthorized absences.
Pay flexibility, when added to other services like financial education and other discounts and savings, can provide a sense of financial wellness for employees.
It helps people take control of their lives, allowing them to stay more focused on the job while helping to reduce absenteeism and enhancing productivity.
The benefits of pay flexibility mean that EWA services are an increasingly popular way of supporting employees as part of a wider pay and benefits compensation package.
Payactiv offers a compelling model for EWA to help both employers and employees. The service is low-cost to employees and zero-cost to employers. Our unique operating model means that our service doesn’t involve lending money to employees – we simply provide access to their cash as they earn it. There are no credit checks and no adverse impact on credit histories. We offer a SaaS-based service that employees can access anywhere with a smartphone. Our service integrates fully with the systems provided by the payroll and HR management providers so that it aligns fully with your payment process from the get-go.
Our unique capabilities also allow employees to access company information and updates, even if they don’t have access to a company PC, which helps to make them feel fully engaged and valued by their management. These capabilities also allow employees to swap shifts quickly and easily to help provide that valued work-life balance. Offering these comprehensive financial wellness benefits ensure higher employee satisfaction and engagement, helping companies reduce turnover and its impact on the bottom line.
Learn more about Payactiv’s Service, or book your demo now.
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