High employee turnover can negatively impact businesses of all sizes with the associated lost productivity and additional costs of replacing employees. But small businesses, which typically operate on tight profit margins, can be particularly hard hit when they lose workers.
Determining the true cost of replacing an employee is difficult. The Society for Human Resource Management uses 2021 survey data to estimate the average cost of hiring non-managers to be about $4,700. Other available estimates put costs much higher, ranging from one-half to two times the employee’s salary.
When tackling the problem of turnover, there are areas where small business owners can focus their efforts to make a meaningful impact.like some compensation and benefits are high cost budget items, while other items such as onboarding and communications are relatively inexpensive.
A Pew Research Center study found that 63% of American workers who left their jobs in 2021 cited low pay as a primary or secondary reason. Providing a competitive compensation package, which typically includes wages, bonuses and other incentives, is just as important as retaining employees. Recruiting new talentRegular pay increases keep employees from looking elsewhere and also help boost morale.
Health insurance, retirement plans, and paid time off are usually provided by your employer. Other benefits can help differentiate your business — such as mental health and wellness programs, commuting allowances, daycare services, and tax-saving options such as: health savings accountflexible spending accounts, and 529 college savings plans.
If investing in a benefits program isn’t financially viable for your business, there are other options, according to Lauren Winans, CEO of HR consulting practice Next Level Benefits. “Whether to purchase medical insurance or offset childcare costs, we can provide reimbursements to employees for using those dollars as they see fit. .”
work and life balance
What small business owners shouldn’t overlook is the ability to enable employees to achieve equity between work requirements and personal demands. Give employees generous paid holidays remote work optionsflexible schedules, and encouraging them to take breaks and speak up when their workload becomes overwhelming are ways to show that you care about your employees’ well-being.
“Anytime small business owners can offer some flexibility and autonomy, it’s hard to find with large employers,” says Winans.
The onboarding process can be key to retaining new employees. “First impressions really matter,” says Holly Wade, her executive director of the National Federation of Independent Business Research Center. A new employee’s connection to and investment in the role can be set within weeks of the first day of tenure, Wade said.
“It’s very helpful to connect them with another employee and have that mentorship from the start,” says Wade. Simple things like hanging out can help them feel part of the team from day one.
Small business owners are often in a position to give their employees new responsibilities that can develop existing talent. “Expanding an employee’s role and being able to acquire additional skills in areas they were not originally employed in is often very attractive to employees and owners,” he says Wade. . By highlighting these opportunities and facilitating career development conversations, you can show your employees that there is room for growth.
You can also encourage them to seek out external professional development resources such as online courses, conferences, workshops, and apprenticeship programs. You can further demonstrate your commitment to employee growth by offering a scholarship or PTO to help offset cost and time obligations.
Awards and Rewards
An employee recognition program that recognizes employee achievements is a good way to show that your employees are appreciated. It can also build personal and team connections by including peer-to-peer recognition where employees can recognize each other’s skills and talents. And rewards like free meals, vacations, and employee discounts, which may or may not be related to performance, go a long way toward motivating employees and making them feel valued.
communication and feedback
Effective two-way communication that emphasizes honest feedback can make the difference between an employee staying or leaving. Regular communication explaining why decisions are made helps build employee engagement and trust. Team meetings, one-on-one meetings, and confidential employee surveys are also tools that help employees feel heard.