The Real Costs of Employee Turnover
How to use perks like 401(k) plans to cut costs
This might be a shocker, but the overall U.S. voluntary employee turnover is 23.4% annually.1 That's nearly one in four employees each year choosing to switch companies.
Replacing an employee: it's 2-4 times more costly than you think
Survey results have shown that most small business owners estimate it costs about $6,000 to replace one employee.2 Most agree that getting a new employee 'up to speed' is the biggest cost.
401(k) plans are much more than a retirement vehicle for employees; they help you save on taxes and can even drastically lower your costs of acquiring and keeping your best talent.
The actual numbers look like this:
- It costs 29% to 46% of an employee's annual salary to replace them3
- So, replacing a $50,000 employee costs your company $14,500 to $23,000
Those figures include things like interviewing time by management, productivity lost due to the vacant position, training the new employee, and any advertising or other associated expenses. But it doesn't include variable costs, such as customers who might leave, or the knowledge lost with a resignation.
How savvy entrepreneurs use 401(k) plans to get an edge and cut overhead
Nearly 40% of small business employees without 401(k) benefits say they'd leave their job for a similar job that offers a 401(k) plan.2 But if by offering a 401(k) you can keep just one $50,000 employee, you'll save enough to cover a ShareBuilder Simplified 401k plan for ten employees for 12 to 20 years.
Top that off with IRS tax credits and deductions your plan may qualify for, and you can lower your 401(k) cost even more. Providing a low-cost 401(k) plan can pay off in spades for your business, and help you stay ahead of the competition. Keeping your best people and lowering turnover costs can be a real advantage!
Strengthen loyalty with profit-sharing and vesting
Profit-sharing and/or matching into your 401(k) plan can be a great way to improve loyalty and reward employees for a job well done. Some companies give matching contributions that vest over a one- to four-year period as an additional incentive to stay while boosting employee engagement in their jobs. That can mean more productivity for your business, too.