Edvest 529: Understanding employee turnover: Causes, costs, and retention strategies

By: Khaleel Ali, Edvest At Work Consultant

MADISON, Wis. (July 12, 2024) – As a person who speaks with many employers around Wisconsin on their experiences, employee turnover is a significant issue many employers face. Understanding why this happens, how costly it can be, and what strategies can help retain employees, is crucial for any business looking to maintain a stable and productive workforce.

While I am not an expert on employee turnover causes, costs, and retention strategies, I have the privilege of speaking to various employers across the state as part of my role as an Edvest At Work consultant. Here are some of the common themes I have heard: 

Why Employees Leave Their Workplaces
According to conversations I have had in the field, there are many reasons employees leave their workplaces: 

1. Lack of Fit: Sometimes, new hires quickly realize that the job or company culture isn’t the right fit for them. This misalignment can lead to early exits.
2. Insufficient Training: Inadequate onboarding and training can leave employees feeling unprepared and unsupported, prompting them to seek opportunities elsewhere.
3. Better Opportunities: New employees might receive more attractive offers shortly after joining, including higher pay, better benefits, or more fulfilling roles.
4. Work-Life Balance: Poor work-life balance and excessive job stress can cause new hires to leave in search of a more manageable workload.
5. Company Culture: A negative or toxic work environment can drive employees away, particularly if they experience a lack of inclusivity or support.

The Cost of Rehiring
According to many employers I have spoken to, replacing employees who leave can quickly become expensive. The costs include:

1. Recruitment Expenses: Advertising, recruiting, and hiring costs can add up.
2. Training Costs: New hires require training, which consumes time and resources.
3. Lost Productivity: New employees take time to reach full productivity.
4. Team Disruption: Frequent turnover can disrupt team dynamics and morale.

According to Investopedia.com, companies spent more than $101 billion on training alone in 2022-2023.¹ This makes employee retention a critical focus for cost-conscious businesses.

Strategies for Retaining Employees
Here are some strategies that have been implemented to retain employees by the companies I have spoken with:

1. Competitive Compensation and Benefits: Offer competitive salaries and a robust benefits package to attract and retain top talent.
2. Career Development Opportunities: Provide opportunities for growth and advancement within the company. This can include training programs, mentorship, and clear career paths.
3. Work-Life Balance: Promote work-life balance by offering flexible working hours, remote work options, and wellness programs.

Retention Ideas That Can Make You Stand Out as an Employer

Some strategies I would suggest employers implement to set them apart:

1. Edvest At Work: As an innovative benefit, employers can offer contributions to employees’ Edvest 529 College Savings Plans. This not only helps employees save for their children’s future education, but also sets the company apart as a caring and forward-thinking employer. This benefit can enhance your employee benefits package and is free to implement, making it more attractive to current and prospective employees. Not only that, but workplaces can also receive an employer tax credit. For more information about the program, click here. 
2. Wellness Programs: Offer wellness programs that include gym memberships, mental health support, and wellness workshops.
3. Employee Recognition Programs: Implement programs that recognize and reward employees for their hard work and contributions. This could be through regular awards, public recognition, or bonus opportunities.
4. Flexible Work Arrangements: Allow for flexible work arrangements, such as remote work, flexible hours, and compressed workweeks.
5. Professional Development: Provide stipends for professional development courses, conferences, and certifications to encourage continuous learning and growth.

High employee turnover is a costly challenge for businesses, but understanding the reasons behind it and implementing effective retention strategies can help mitigate this issue. By offering unique benefits like contributions to an employee’s college savings plan, fostering a positive work environment, and promoting work-life balance, employers can differentiate themselves and retain top talent.