As a business owner, staff retention has many benefits in terms of cost and the often unseen consequences of significant staff turnover. Therefore, it is essential to consider the cost of employee benefits against the cost of replacing low, medium and high-level staff. We have seen employers who have decided to cut employee benefits, pushing up employee turnover rates and significantly impacting both finances and client relations.
Why do employees move on?
A survey by Edenred in 2022 cast a fascinating light on the reasons why people quit their jobs. The results from a 2000 people surveyed were as follows:-
- 15%, feeling unmotivated
- 14%, overworked and stressed
- 14%, impression management didn’t care about their well-being
- 14%, poor working atmosphere
- 13%, underpaid
- 11%, rude management
- 11%, limited room for progress
While we tend to automatically assume that people leave their employment rules for enhanced salaries, this was only number five on the list. Before we look at ways you can use employee benefits to retain staff, let’s look at the potential cost of replacing employees.
How much does it cost to replace an employee?
There is some debate about the average cost of replacing an employee, with the replacement process potentially taking up to 28 weeks and costing more than £25,000 in lost productivity for some companies. Some surveys take a more straightforward approach, highlighting the cost of replacing an employee based on their position in the company:-
- 16% of the annual salary of low-paying jobs
- 20% for those in mid-range positions
- 213% for those in executive positions
In reality, all situations are unique, and the vast knock-on effect on the business will often overshadow the upfront cost of replacing an employee. Whether relatively small, medium-sized or large, every pound you spend on replacing employees is money (and time) you could be spending growing the business.
Employee benefits
At Cedar House Financial, we have years of experience regarding employee benefits, controlling costs and maximising returns. Everything is relative because, as you can see from above, it can cost thousands of pounds to replace a relatively junior staff member, and this is before we even look at the impact on your business.
There are several employee benefits you can use to help retain members of staff:-
Workplace pension
It is now a legal duty for all employers to provide a workplace pension for their employees. The minimum contribution is set at 8% of the employee’s earnings, a minimum of 3% from the company and 5% from the employee. Some employers will pay more than the 3% minimum, which is an extension of their legal requirement and can mean the difference between retaining and losing staff members.
Life insurance
At the end of the day, we all want to ensure that our nearest and dearest are catered for in the event of our untimely passing. Many employers now offer life insurance as part of their pension service, providing additional comfort for employees. There are also different types of (key person) life insurance which can be structured to cover the cost of replacing different members of staff.
Private medical cover
In the aftermath of the Covid pandemic, we have seen a significant increase in NHS waiting lists, prompting more people to seek private medical cover for themselves and their families. Depending on the size of your company and financial resources, for many employers, private medical cover costs are relatively minor compared to the costs associated with losing and replacing staff members.
Summary
While easier said than done as an employer/business owner, it is better to see the cost of employee benefits as an investment instead of a cost. You are investing in your employees, recognising their importance to you and their well-being. Aside from the financial costs of replacing staff regularly, changing contact points and personnel does not look good when pitching for new clients on bidding to retain existing customers.
We can advise you on the options, comparing the financial impact to the positive effect on staff morale and retention in the longer term. Please contact our team at your convenience, and we will look at your situation in more detail.