For over a decade, since the Great Recession in 2008, employers have had something of an upper hand when it comes to hiring. The employee pool was large and highly competitive, with young workers eager to get their foot in the door and experienced workers vying for the precious few advancement opportunities.
That balance of power has tilted recently, with a workforce that has been diminished by a number of factors, including an increase in retirees and an exodus of women from the labor market, dubbed the She-Cession.
The takeaway? Smaller labor force participation means that top talent is hard to find, and the cost of turnover is hitting company bottom lines hard. How hard? Let’s look at the numbers.
Common workplace wisdom states that it’s much more cost-effective to hold on to existing employees than to hire new ones. Conservative estimates put the cost of replacing an employee at up to twice the position’s annual salary. What are all the costs? There are, of course, the investments of time and money involved with finding, hiring, and training a new person. But there are other, hidden costs to losing employees, such as:
- Production delays and reduced operational efficiencies
- Loss of institutional knowledge
- Loss of innovation and leadership
- Impact on employee morale across the organization
- Diminished customer/client experience
- General on-boarding training
Although turnover is never a good thing, for hard-to-fill positions it can be more than just a costly inconvenience, it can be catastrophic. Consider the following statistics on hiring costs by job rank:
- Hiring an entry-level employee costs about 20% of that employee’s salary.
- Mid-level employees cost about $60,000 to hire, which works out to around 1-1½ times their annual salary.
- The cost of hiring an executive-level employee typically exceeds 200% of the role’s annual salary.
The time it takes to hire employees is another cause for concern, since each day that a job goes unfilled has an impact on the company’s efficiency, output, and bottom line. On average, a vacancy costs about $98 per day. And certain sectors have it better than others. Franchise employees tend to be hired in about ten days, while private sector, hospital, and non-profit employees take an average of 20 to 30 days to hire. The public sector has it the worst, with an average time-to-hire of 60 days.
With the numbers painting such a stark picture, there’s only one smart move for employers to make, maximize their employee retention and avoiding unnecessary turnover.
To do that, it’s crucial to understand why we’re seeing employees leave their jobs in record-breaking numbers. A large segment of the workforce is experiencing burnout. The past few tumultuous years have taken their toll and stretched people’s resilience to the breaking point. This has led to people evaluating their life and what they and their family need. As a result, many have opted to walk away from jobs where they feel overworked and underpaid.
Another significant motivator for leaving a job is having little to no opportunities for advancement. Over half of the workforce have a desire to learn and grow in their roles, says a recent study. If their organization doesn’t offer professional development and a shot at promotion, talented workers will simply look for greener pastures where their ambition is recognized and rewarded.
Employers can plug some of their talent leak by offering virtual training programs that give their workforce the ability to learn, grow, and develop in a way that’s flexible and accessible. Jigsaw’s immersive learning approach offers a virtual training solution that supports and enhances employee engagement during training. Having a sound training program helps organizations hold on to their best and brightest and can turn average performers into rock stars. Schedule a demo to see how it works. Minimizing turnover puts organizations in a position to optimize their resources. What does the hiring landscape look like in 2022? In part 3 of this series, we’ll look at the concessions and negotiations employers are having to make when filling their open job positions.