How Benefits Can Improve Hourly Employee Retention
If you employ hourly workers for your business, chances are employee turnover is an issue for you. Employee turnover is worse in certain industries than others. Restaurants, for example, experience turnover rates of more than 70% each year. According to the U.S. Department of Labor, hourly employees have a turnover rate four times higher than their salaried counterparts on average. If left unchecked, high turnover can demoralize your workforce and cut into your bottom line.
One of the main reasons hourly employees hop around so much is because their skills are transferrable to many other similar jobs on the market. This means if a competitor is hiring for a position that you’re employing someone for, and they offer 50 cents or a dollar more per hour, chances are your employee will jump ship for the pay raise. You can increase your wages to be equal to or more than your competitors but you can only compete on price to a certain extent. So how can you improve your employee retention?
One of the best ways to improve employee retention is by providing your employees with benefits. If you think it sounds unfeasible to provide your employees with benefits, consider the costs.
The cost of employee turnover
The cost of replacing an hourly employee varies by industry. Employee replacement cost estimates vary from a third to half of the employee’s annual salary. This means it can cost anywhere between $5,000 to $8,000 to replace an $8/hour employee. If the cost of replacing an employee sounds surprisingly high to you, consider the fact it includes not only the cost of hiring and training but also the associated costs of lost productivity and sales. Depending on how many employees you lose to turnover, your expenses to replace workers may eat into your profits significantly.
The impact of benefits
Many companies achieve lower than average turnover rates by providing their employees with benefits. Costco, for example, provides most of their employees with health insurance coverage. While Costco spends more on employee benefits than their competitors, they enjoy one of the most loyal and productive workforces in retail, with an average turnover rate of 17%, compared to the close to 50% industry average.
Dorothy Lane Market, a chain of gourmet grocery stores based in Dayton, OH, provides all of its employees with health insurance. The company also contributes 50% towards their employees’ local gym memberships. As a result, Dorothy Lane has an average employee turnover rate of 30%, compared to the close to 100% industry average.
The bottom line
If you cannot afford to provide your employees with health insurance benefits, consider alternative options such as giving paid time off and offering flexible hours. Survey your employees to find out which benefits they care about most.
Chances are your long term savings from lower turnover will outweigh your expenses from providing employee benefits. While providing benefits may cost you in the short run, your employees will reward you by staying with you for longer. Let us help you hire the candidates you need today!