Incentive programs are everywhere. Companies use them to increase customer loyalty, promote corporate health and wellness, and to increase productivity, but one other use incentives can have is to increase employee retention.
Why Incentives Save You Money Through Retention
It’s no secret that companies want to retain their employees, but many companies don’t understand how expensive losing employees actually can be.
The cost of employee turnover can be calculated as:
(Hiring Cost + Onboarding Cost + Development Cost + Unfilled Time Cost) x (Number of Employees x Annual Turnover rate) = Cost of Employee Turnover
For example, take a company of 200 people with a 12% annual turnover rate. The company spends $27k per person on hiring, $5k per person onboarding, $12k per person on development, and will lose $55k of productivity when refilling a role:
(Hiring Cost: $27,000 + Onboarding Cost: $5,000 + Development Cost: $12,000 + Unfilled Time Cost: $55,000) x (Number of Employees: 200 x Annual Turnover rate: 12%) = Cost of Employee Turnover: $2,376,000
Our example company loses over 2 million dollars annually to employee turnover, and that’s not even considering some of the other indirect losses a company experiences as a result of employee turnover.
Indirect Losses From Employee Turnover
High turnover rates can damage your reputation, cause a loss of valuable knowledge, and disrupted productivity employee development, and team dynamics.
Damage To Your Brand
Employee turnover can damage your company’s brand reputation. A company with a reputation of high turnover can lose the respect of their customers as well as their employees. When people hear a company has a high turnover rate, they always suspect the worst about them.
Loss of Company Knowledge
Your company is likely to lose information and knowledge that was essential to your company. You lose whatever knowledge the previous employee had, which they might have been able to pass on to other employees had they stayed. You also may lose operational knowledge, such as supplier contact information, passwords, and documents.
Company Productivity Losses
The loss of an employee can cause productivity to go down for many reasons. If it’s a lower-level employee, it may go down because your other staff has been left short-handed. If it’s a manager, the productivity may go down because there is a lack of leadership. Or, if the employee was well-liked, their loss may cause a general feeling of lethargy among employees.
Why You Need To Take Employee Turnover Seriously
You might be wondering if there really is a high rate of turnover and if it’s really worth worrying about. Well, according to the Bureau of Labor Statistics, the employee turnover rate in the U.S. is over 25%. If we take that number and add it into our equation from earlier, at 25% a company like the one in the example above could lose $4,950,000 to employee turnover.
How Incentive Programs Can Help Reduces Employee Turnover
Incentive programs increase employee retention, satisfaction, and productivity. With regular employee incentive programs companies can save millions of dollars they would have otherwise lost to employee turnover. An incentive program shows your people that you value them and increases their engagement and motivation. According to a study released by Bersin & Associates, there’s a 14% higher rate of productivity in companies with incentive programs. Additionally, companies with engaged employees have higher rates of retention.
All Digital Rewards has extensive experience in working with incentive programs. We can provide the right rewards, technology, and support to create an effective incentive program to increase employee retention. To speak to one of our incentive program experts and learn about how we can help you, call us now at 866-415-7703, or click on the button below to schedule a demo.