Why Employee Retention Beats Hiring New

In today’s changing economic landscape, the ability to maintain a steady workforce has become more complex. The ability and appeal to jump to a new job has seemingly increased in the last year. This has led to increased turnover and an increase in employee expectations of their employers. In a recent report by the Bureau of Labor Statistics, it noted that in 2021, the overall year-over-year quit rate of employees had increased to 2.9%, which exceeded the layoff rate of 0.8%. Employers are left to decide if it is better to retain their existing employee base, or take advantage of eligible workers looking to change jobs and hire new. When considering hiring new vs. retaining existing employees, companies need to consider the tangible and intangible costs. 

Cost to Recruit

What are some of the costs associated with hiring new employees? First, consider the investment in advertising and searching for a new employee. If the job market is tough, and if you are hiring for a position requiring unique or expert level of skills, this investment may be extensive. Not only might you have to pay for advertising, but you may require the assistance of a professional recruiter.

Hiring Bonuses

A second cost once someone has been made an offer is the hiring or incentive bonus. Because competition amongst other companies may be heavy, your company may need to up the ante on the incentive compensation offered upon hiring. These payments can add up quickly the more you need to hire new vs. investing in retaining an employee.

Onboarding

A third cost involves onboarding new employees. A current employee is already operational and earning money for your company. A new employee is going to require an investment in training. In all likelihood, this employee will not be earning money toward your bottom line until the training and onboarding is complete. Simultaneously, your company is also spending money on that training.

Intangibles

The last cost to consider is an intangible cost. Oftentimes, employee morale as a whole declines when others leave the corporation. Their departure can raise questions about whether there are better opportunities elsewhere, and in some cases, motivation can dip. This lowered morale can yield lowered productivity, and the potential for more employees to seek alternative employment.

A key component to maintaining employee satisfaction and retention is a robust compensation management system. By maintaining a clear line of sight to performance management objectives, employees have demonstrated not only greater success in achieving their goals and variable pay objectives, but also greater company loyalty. To learn more on how an incentive compensation management system can help you retain employees, visit us at https://themotivator.com.