Have you heard that it costs an organization 150% of an employee's salary to replace them? Although that statistic may seem high, it's not even the peak. Research shows that it costs between 30% and 50% of an entry level employee's salary to replace them. For mid-level employees, that figure goes up to 150%. And for high-level or very specialized employees, the cost can be a staggering 400% of their salary!
If you're wondering why it's so expensive to replace employees, the answer is there are a lot of hidden costs that go into this equation. While that may sound like bad news for businesses, there's actually a silver lining. Any company that's able to increase their employee retention can save quite a bit in these costs. So with that in mind, let's look at some of the surprising ways employee retention can save money:
One of the reasons it's expensive to replace a mid-level or high-level employee is it generally takes quite a bit of time to even identify candidates who are qualified for the job. And once those candidates are identified, they're going to have to be taken through multiple rounds of interviews. Keeping employees in an organization will prevent a company from needing to dedicate any additional resources to the process of scouting and interviewing.
The significant costs associated with new hires don't stop at finding the right candidates. From there, substantial resources have to be invested in training and bringing a new hire into the fold. Employees with specialized roles require much more attention in this area, which is why keeping those employees can minimize this cost.
Even though this cost is often overlooked, it's actually quite significant at all levels. If entry-level employees are constantly coming and going, it can create a culture where everyone is always concerned about losing their job. And if retaining mid and high-level employees is a challenge, it can cost a company a lot in regards to not having strong leadership.
Those issues tie directly into employee productivity, which can cause employees to become disengaged. Given that disengaged employees cost the United States $450 to $550 billion a year in lost productivity, this is definitely an area that's important to counteract via retention.
No amount of documentation can retain all the knowledge that an expert employee has about their role. The only way for a company to keep that knowledge instead of having to invest in building it up again is to retain the employees who have it.
By making retention a top goal in 2016, your business will be able to benefit from the savings covered above and many others.
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