The Real Cost of Employee Turnover

The overall U.S. voluntary employee quit rate in 2024 was 24.9%1—meaning roughly one in four nonfarm employees chose to quit and/or switch companies. At the same time, 47.2% of employers struggled with hiring and retaining employees.2 Given these challenges, you may be wondering what you can do to keep your employees engaged and committed. Offering important benefits like a 401(k) may help reduce employee turnover and strengthen employee retention. 

It's Likely Much Costlier to Replace One Employee Than Offering a 401(k) Plan

When you really factor in core costs to replace an employee, it adds up quickly:

  • It costs 29% to 46% of an employee’s annual salary to replace them (non-management vs. management drives the range)3
  • So, replacing a $50,000 per year employee may cost you $14,500 on the low end

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.

401(k)s and Employee Retention

401(k) benefits can help retain your top talent and they are typically a lot less expensive than needing to replace an employee. Research indicates that 78% of employees would leave their current employer if they felt their benefit package was inadequate4. Whether you're recruiting or seeking to keep your current employees, a 401(k) can be a terrific incentive.

Not only do you benefit from certain tax credits, tax deductions, and tax savings by opening a 401(k), but you and your employees can contribute to your 401(k) plans tax-deferred, meaning you can reduce your taxable income now, and pay taxes only when you withdraw funds in retirement. Additionally, you have the flexibility to make Roth contributions, giving you even more control over your savings strategy. 

Strengthen Loyalty with Profit Sharing and Vesting

Profit sharing and/or matching into your 401(k) plan can be a great way to help 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. 

Learn More
  • 1 U.S. Department of Labor, Bureau of Labor Statistics, Job Opening and Labor Turnover–February 2025
  • 2 2024 US Mercer Turnover Survey
  • 3 "Retaining Talent: A Benchmark Study," DDI, Paul R. Bernthal, Ph.D. & Richard S. Wellins Ph.D.
  • 4 2024 Intuit QuickBooks All State Health Solutions Benefits Survey