January is typically a high-turnover month, as it’s a time of the year when companies make decisions about hiring and layoffs while employees tend to reconsider their professional circumstances and goals. So now is an ideal time for recruiters to closely examine their ability to attract and retain top talent. Beyond making a compelling case to candidates, HR teams should be mindful of whether they’re meeting existing employees’ needs, especially when it comes to benefits.
One way to cover both bases is for recruiters and HR teams to determine whether their benefits programs maximize employee value. This means ensuring that the company offers benefits employees actually want and providing enough flexibility to meet the demands of diverse workforces. Employee turnover is extremely destructive – it imposes immense direct costs on companies, slashes productivity, harms morale and workplace cohesion, and reduces already low workforce engagement rates.
These consequences frequently have multiplier effects. Turnover can be contagious, and employees are under increased strain when the company scrambles to replace their departed colleagues. Meanwhile, prospective employees will be discouraged from working there when a company earns a reputation for having high turnover. These are all reasons why recruiters and HR teams need to carefully evaluate their benefits to identify which ones employees embrace and which ones are working against them.
The Debilitating Costs of Turnover
There’s a reason 93% of organizations are concerned about employee retention – turnover costs companies vast sums of money and has a deeply corrosive impact on the workforce. Gallup reports that the cost of replacing an employee can “range from one-half to two times the employee’s annual salary,” while the total financial burden for American businesses is $1 trillion annually. Considering that over half of employees are actively or passively searching for a new job, many companies should be especially concerned about these consequences.
There are more job openings than employees to fill them, and turnover can be incredibly costly in a tight labor market. Despite some recent slackening in the labor market, budgets for salary increases are at a two-decade high, and the talent competition is still intense. But the financial effects of turnover are only part of the story – there’s also the pressure turnover exerts on employees. Forty percent of employees say they feel burned out when their companies are understaffed, which can severely blow productivity, customer service, workplace culture and many other aspects of a healthy business.
Almost 60% of employees are quiet quitting, which means they’re disengaged at work and lack strong connections to colleagues. It also means they’re more likely to leave. At a time when the costs of turnover are so high and retention offers a significant competitive advantage, HR teams have to focus on how they can keep employees around in 2024.
How To Improve Employee Retention
Over the past several years, employees have been under tremendous stress. First, they were hit with a once-in-a-generation pandemic and forced to rethink how and where they work radically. Then came surging inflation and other sources of economic anxiety – from extremely high levels of household debt to shrinking economic growth rates and the threat of recession. It’s no wonder that 57% of employees say money is the leading cause of stress, while almost three-quarters want help with their finances.
While various forms of financial support such as pay raises, 401(k) matching and financial guidance are crucial, employees have other priorities that recruiters and HR teams need to focus on. For example, employees are demanding flexibility across many aspects of their jobs: how they work (83%), the type of work they do (79%), their work schedules (79%), where they work (77%), when they work (75%) and who they work with (65%). One reason employees want flexibility is their desire to be treated as individuals with their own professional goals, which is why companies that excel at workplace education and internal mobility are significantly more likely to retain employees.
Companies face an employee engagement crisis; less than a quarter of employees say they’re engaged at work, and turnover remains a severe problem. To address these issues, HR teams have to provide more comprehensive support for employees – particularly regarding the benefits they offer. While this will keep employees around, it will also help recruiters attract the best talent.
Better Benefits Can Drive Recruitment and Retention
Employees increasingly report that their companies’ benefits aren’t meeting their evolving needs. According to a recent Metlife study, the number of “must-have” benefits has risen from 6.6 pre-pandemic to 8.3 now, and 61% of employees say they’re interested in benefits that their companies don’t offer. While 83% of companies think employees are satisfied with their benefits, only 62% agree. Benefits make employees feel like their companies care about their well-being, and employees who feel cared for are 92% more likely to be engaged, 56% more likely to be productive and 65% more likely to be loyal.
Many employees want companies to surpass standard and widely underused benefits like PTO. For example, our research has found that 83% of employees would be interested in flexible benefits like convertible PTO – which would allow them to use the value of their accrued time off for other financial priorities – and 90% would be more likely to stay with their companies if such benefits were available. This mirrors further research, such as Metlife’s finding that 70% of employees are interested in customizable benefits – a proportion rising in recent years.
Flexibility is critical because it will help companies meet diverse employees’ needs and goals. Employers should never treat employees as interchangeable – young workers often have different concerns and aspirations than their older colleagues, working parents have their own needs, nonwhite and female employees face unique obstacles and so on. When HR teams and recruiters emphasize the flexibility of their benefits packages, they will be in a stronger position to attract and retain a larger pool of qualified employees.
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