UBP blog


Employee turnover costs more than you think

We’ve all probably heard of the traditional formula for calculating the cost of replacing a terminated (voluntary or involuntary) salaried employee, one and a half times the exiting employee’s annual salary right?

Well, according to Watson-Wyatt Worldwide’s model for calculating the true-cost of replacing a salaried employee, the one and a half times their salary figure is just a piece of the pie. Here’s why.

This figure consists of the actual out-of-pocket costs (i.e. cost of advertising your job vacancy, cost of working with recruiters to fill the now vacant position, extra pay for unused vacation time, etc.) that the accounting department uses to determine the cost of replacing an exempt employee. Watson Wyatt calls these costs the “green costs”. They also identify two other types of costs that employers should consider, these are:

  • Real (labor) Costs: the cost of labor to deal with an employee’s exit
  • Hidden Opportunity Costs: The costs of lost revenue resulting from the position’s vacancy as well as the lower team performance. For example, Watson Wyatt found that when a typical industrial salesperson leaves a company, his or her team’s sales production can decrease by 3 to 5 times the out-of-pocket costs of the exiting employees.

What does this mean for employers?

Time to ramp up your employee retention programs:

 How do employers retain key employees? One of the first and most obvious things that comes to mind is making sure compensation and benefits packages are strong (or at least in line with the industry average). However, having strong compensation and benefits package means nothing if your employees know nothing about them. How are you educating employees on the value of their incomes and their benefits?

The HR in a Box™ and online Total Compensation Statements are key for our clients:

Universal Benefit Plans custom creates online Total Compensation Statements for our clients’ employees that are easily accessible 24/7 through their unique, password protected platforms of The HR in a Box™. Employees who can see all the pieces of the total compensation pie, and the dollar amount everything adds up to, become more appreciative of what their employers are doing for them and may think twice about leaving for a competitor. If your employees only learn about their total compensation at their termination interview when you start explaining COBRA costs, it’s already too late!




What keeps employees up at night more than their debt and retirement funds?

How about providing health insurance to both themselves and their families?

The Certified Financial Planner Board of Standards’ 2009 National Consumer Survey on Personal Finance reveals that “generating current income” and “providing health insurance” are numbers 1 and 2 respectively on this year’s list of greatest consumer concerns.

Here’s their list of the top 5 concerns: 

  • Generating current income (59%)
  • Providing health insurance coverage (55%)
  • Managing or reducing debt (53%)
  • Building a retirement fund (51%)
  • Creating an emergency fund (47%)

What this means for employers:

Right now, employees’ greatest concerns are generating an income and insuring themselves and their loved ones. For employers, this means effective benefit and compensation communication is key.

1. Communicate total compensation:

One great way for employers to address the top two employee concerns is through online Total Compensation Statements. These statements show employees every dollar that you’re contributing towards their income generation and their insurance coverage. When employees see the big picture of these two figures put together, it will help them to appreciate everything you’re giving them that much more.

Through our proprietary online HR and benefits management platform, The HR in a Box™, Universal Benefit Plans gives our clients’ employees free access to online Total Compensation Statements 24/7/365. 

2. Offer helpful hints:

In addition to communicating employee total compensation in a streamlined, green and easily-accessible way, HR professionals can offer employees helpful tips for managing their incomes and debts. For example, there are numerous ways to pay down credit card debt faster, such as consolidating all of your credit card debt to a lower interest card and finding small amounts of everyday savings to apply to the principal.

There are many other helpful hints out there that employers can pass along to employees. To access these hints, HR professionals can subscribe to receive free daily or weekly tips from financial websites and select tips to pass along to their employees.

The Hr in a Box™ Employer platform is a great employee communication tool that HR professionals can use it to send financial tips (as well as other HR communications) to all employees.

To sum everything up, Total Compensation Statements highlight all you pay for your employees and the communication tool on The HR in a Box™ lets you help them manage their financial resources better. So now, you can show your employees you care about the things that are keeping them up at night without spending any additional money (which would probably keep your fiscal department up at night!).

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