Want to keep your employees? Try better benefits
A better hiring mood and a labor market overflowing with quality candidates could make CEOs complacent when it comes to retaining staff.
That would be a mistake according to Luke Vandermillen, vice president at advisory firm Principal Financial Group, who said employee turnover can be costly.
Citing estimates, Vandermillen said the one-time cost of replacing just one employee can be as much as 150 percent or more of their annual salary. Recruiting, hiring and training replacements for lost people add up and companies also suffer from lost productivity and intellectual capital, he added.
As the labor market heats up, companies need to think more about how to retain employees who have more options open to them, said Vandermillen.
“Benefits can play a role in retaining employees,” said Vandermillen, whose firm just released its annual guide that helps businesses reduce worker turnover by better managing benefits policies. “The companies that really seem to do a good job of this really stay the course as it relates to their benefits.”
Principal, which produces its guide by drawing benefits best practices from the experiences of companies it has ranked top at the task, has found turnover rates can be reduced significantly when firms offer decent benefits packages to workers. The 90 companies that have made the cut in the Principal 10 Best Program over the past nine years have a voluntary employee turnover rate of 7 percent compared to the national average of 24 percent.
Emeryville, California-based Clif Bar & Company, which makes all-natural and organic energy bars, made Principal's top 10 in 2010 by adding new benefits such as employee stock ownership programs, access to preferred provider discount plans, supplemental life and disability insurance and access to financial planning services.
Another winner, Columbus, Ohio-based adhesive manufacturer Franklin International, was able to lower company costs and employee premiums for several benefits without reducing benefit levels by negotiating with its vendors.
“What the better companies are doing by working with their financial advisers is getting creative around their benefits package,” said Vandermillen, adding there is no one-size-fits-all solution when it comes to determining what benefits package to offer.
However there are some general trends employers can look to for guidance. Principal also does a quarterly survey of American workers and retirees, asking what the most important benefits are to them. Perhaps not surprisingly, health insurance ranked first, with retirement plans, dental coverage, disability, vision, pension and life insurance following in that order.