Companies make no bigger investment than in their employees
It’s no secret; the largest single cost that employers have is the cost of employment of their employees. If the costs of employment itself were not enough, when recruitment, hiring, and turnover are factored in, the costs become staggering.
So just how expensive is it to bring a new employee on board? The Society for Human Resource Management puts the 2018 figure at $4,129 in hiring costs per employee, requiring 42 days to fill an open job requisition. Glassdoor puts the figures at $4,000 and 52 days, respectively. By any standard, that is a substantial investment both in terms of dollars and time invested by HR and others in identifying, interviewing and negotiating terms with candidates. An even bigger cost question might be, what happens once that investment of dollars and time is made in a new employee? The answer is unsettling as the frequency and costs associated with turnover rapidly pile on top of the significant investment already being made to hire new employees.
Employment is becoming a short-term relationship
At the beginning of last year, Work Institute estimated that up to 42,000,000 Americans would leave their jobs in 2018, which accounts for about 25% of the entire U.S. workforce. That bears repeating, one in four employees will leave their job despite the fact that employers have made that substantial investment in the hiring process. In some industries, such as retail, customer service, and travel and hospitality, the turnover rate can approach 40%.
Some experts have estimated that the cost of losing an employee can reach 150% – 200% of the annual salary of each position. While the recruitment and hiring costs noted above are part of this, there are several other factors that can compound the cost problem. A new employee may not be making a meaningful contribution in their role for a period of time while going through the training and onboarding process. Even once training and onboarding is completed a new employee will typically have a lower level of productivity for some time as they advance through the learning curve of a new position, not to mention the potential costs of errors made due to inexperience. The costs are not limited to the new employees either. Existing employees need to invest their time in the hiring and training process, and seeing the turnover going on around them impacts their own perceptions of their work place.
In total, Work Institute estimates that in 2018 the aggregate cost of employee turnover in the U.S. was $600 billion, and will rise to $680 billion by 2020. That is billions with a “B”. To put that figure in perspective, that is almost as much as the annual revenues of Apple and Walmart, combined.
Employers can get ahead of some of these costs by “advertising” an investment they are already making
Even with hiring costs and turnover, employers still manage to “fill their seats” so to speak. While those seats may be filled with a number of different faces throughout the year, the seats remain filled for a majority of the year. According to the U.S. Bureau of Labor Statistics (BLS), the average cost of employment in 2018 was $34.05 per hour. Based on a typical work year of 2,080 hours, that’s about $71,000 per employee. The BLS also said that within those figure benefits are adding about 50% to the cost of employment, or about $23,500 per employee per year (e.g. wages account for approximately $47,000 per employee per year, add 50%, or $23,500, and you arrive at ~$71,000). While a significant portion of the $23,500 is employment taxes, employers pick up approximately 50% of the cost of optional benefits, or $6,400 per employee per year.
BeneCom can help employers design an effective communications plan that highlights their substantial and generous investment in their employees’ benefits. This can help entice top-quality talent thus reducing hiring costs while improving retention. Furthermore, effective communication plans can include newsletters that help employees become more educated healthcare consumers enabling them to understand how to better manage and improve their health. It also allows the company to promote health-related contests and upcoming benefit changes. Interactive self-guided enrollment materials can help employees make more informed benefits choices when it is convenient for them. Materials can be customized in multiples languages, or for specific audiences such as executives or unionized labor, which may have different benefits options from other employees.
While communications plans can range widely depending on the needs and size of the employer, even a robust plan can often cost as little as 1% or lower of that $6,400 spent per year on optional benefits.
These eye-popping figures are very relevant for brokers as well
While a broker-employer relationship differs from the employer-employee relationship, many of the same metrics in terms of client acquisition and turnover costs apply. Advising your employer-clients about the value of an effective benefits communications plan cements you in their eyes as not “just as a broker” but rather as a health benefits consultant that is an integral part of their decision-making team. When you bring your employer-clients valuable ideas beyond just the nuts and bolts of available plans, you help them see their employee acquisition costs, turnover rate, absenteeism, and sick days drop while seeing their satisfaction, retention, and health improvement rates increase. They will have you to thank for it and continue to maintain their relationship with you for years to come.
BeneCom is here to advise and help
Contact BeneCom today for a more in-depth discussion about the needs for your companies’ benefits communications or that of your employer-clients. We will work with you to design an effective communications plan that is right for you.