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Employees Stay Longer with DailyPay

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Getting to the Root of Employee Retention

Hiring people is hard work, and it’s getting harder. The unemployment rate is extremely low (4.1%) and going down.

 

This means it’s harder to find quality candidates. It also means that your job-market competitors will stop at nothing to get the best people they can—even if that means luring your employees.

 

And your employees are well aware that hiring managers will greet them with open arms elsewhere.

 


WHY RETENTION STRATEGIES ARE AS IMPORTANT AS HIRING STRATEGIES

According to a CAP study, the average costs to replace an employee are

 

  • 16% of annual salary for jobs earning under $30,000 a year.

The cost to replace a $10-per-hour retail employee would be $3,328.

  • 20% of annual salary for jobs $30,000 to $50,000 a year.

The cost to replace a $40,000-per-year manager would be $8,000.

  • Up to 213% of annual salary for highly educated executive positions.

The cost to replace a $100,000-per-year employee would be $213,000.

 


RETENTION PROTECTS YOUR MOST CRITICAL INVESTMENT: PEOPLE

 

There are intangible or untrackable costs associated with turnover.

 

In an article on employee retention, Josh Bersin of Bersin by Deloitte outlined the range of factors to take into account when arriving at the actual cost of employee turnover. These factors include:

 

  • Cost of hiring (advertising, interviewing, screening, hiring)
  • Cost of onboarding (training, management time)
  • Lost productivity (1-2 years to reach the productivity of an existing person)
  • Lost engagement (other employees see high turnover and disengage)
  • Customer service and errors (new employees take longer and are often less adept at solving problems).
    • In healthcare this may result in higher error rates, illness, and other very expensive costs (not seen by HR)
  • Training cost (over 2-3 years, you likely invest 10-20% of an employee's salary in training)
  • Cultural impact (when someone leaves, others take time to ask "why?")

Employees are an “appreciating asset” to your business. The longer they stay, the more knowledgeable, skilled, productive, and cohesive they are.

 

Which is exactly why it’s urgent that you do everything you can to protect your investment.

 

In an earlier article, we tackled the hard problem of absenteeism by breaking down the root causes of absenteeism then outlining strategies to minimize these causes. Today, we’ll do the same with turnover.

 


 

THEWORK

 

 

Bad fit

This could be your fault, the employee’s fault, or a mix of both.

 

If the employee was desperate at the time of hiring or you failed to explicitly lay out the role and its responsibilities, then you have sunk money into a losing battle.

 

Make it a habit to sit with employees and, rather than asking if they like what they’re doing—which will surely result in a paranoid “Yes! Of course!”—try to find out what things in the company most fit with their skill sets and interests. If you can, find a way to move the employee within the company to save your investment.

 


 

Bored or unchallenged

For the average American worker, they will spend 90,000 hours of their life working. That’s one-third of a person’s lifetime. When someone is bored at work, they disengage. Their productivity tapers off (likely as they look for a new job). And finally they leave for something more exciting.

 

Just as above, find out what roles or responsibilities can be shuffled around. For long-time employees, they may be doing the same or similar tasks to what they were doing when they started, and it becomes tedious. If you can’t find something just yet, offer an education stipend for online courses so that, together, you find a happy middle.

 


 

Feeling insignificant

Managers often assume that employees will intuitively understand how their efforts fit into the mission of the department and the company at large. That’s a dangerous assumption to make.

 

Let each employee know the relevance of their position in fulfilling a much greater goal and find ways to acknowledge their good work and its macro contribution. Be intentional in conversations with employees, and highlight their recent wins.

 


MAIDS CTA (1)


 

Micromanagement and hovering manager syndrome

According to one research paper, long-term micromanagement can engender “low employee morale, high staff turnover, [and] reduction of productivity.” The paper’s authors note:

 

“The negative impacts [of micromanagement] are so intense that it is labeled among the top three reasons employees resign.”

 

According to the Harvard Business Review, “a consistent pattern of micromanagement tells an employee you don’t trust his work or his judgment, it is a major factor in triggering disengagement.”

 

Personal autonomy at work correlates to lower turnover among nursing-home workers, higher engagement at work for nurses, and an alleviation of negative emotions felt by customer-service employees doing stressful work.

 

Autonomy and the freedom to tackle problems creatively will empower employees to take ownership of their work and feel pride in a job well done because it was their hard work, not simply the execution of a detailed checklist.

 


 

Lacking a larger meaning

In the classic piece, “Working,” Studs Terkel interviewed hundreds of people about their work and how they felt about it. What he found was as profound as it was unsurprising:

“Work is about a search for daily meaning as well as daily bread, for recognition as well as cash, for astonishment rather than torpor, in short, for a sort of life rather than a Monday through Friday sort of dying.”

Consider the story about the NASA janitor: when JFK asked him what his job was, the janitor said, “I’m helping to put a man on the moon.”

 

When employees understand the greater purpose they serve in their business, any role can be seen as meaningful.

 

From the Harvard Business Review:

 

“Finding meaning at work has become so important that there are even public rankings for the most meaningful jobs. …

 

“Interestingly, meta-analytic studies indicated that there is only a marginal association between pay and job satisfaction. A lawyer who earns $150,000 a year is no more engaged than a freelance designer who earns $35,000 a year.”

 

This part can require creativity for certain companies, but it segues well into the biggest way to create meaning in the workplace: with meaningful relationships.

 


THERELATIONSHIPS

 

With the boss

Employees don’t necessarily have to be friends with their boss(es), but they need to have a relationship with them. It’s obvious that an uncomfortable relationship will foster disengagement, but so will a non-relationship.

 

Provide regular feedback. Get off of Slack or other digital channels to speak directly every now and then. Spend time in one-on-one meetings. If you read our article on absenteeism from last week, you’ll notice that the overriding theme regarding solutions to disengagement, turnover, and absenteeism starts with conversation. As a manager, you’d be hard-pressed to find a better tool.

 


 

With coworkers

Research from Gallup has shown that strong friendships among coworkers are a boon to businesses.

 

  • Employees who have best friends at work are 7x more likely to be engaged in their jobs
  • Employees who have at least three "vital friends" at work are 96% more likely to be satisfied with their lives.

 

But how do you get your team to all be best friends!?

 

In an interview with Gallup, Tom Rath, author of Vital Friends: The People You Can't Afford to Live Without, said:

 

“I think if a company tries to force friendship, it not only might have the opposite effect, it's also just a little creepy.

 

“What companies can do is set up an environment that promotes or encourages friendships, because whether organizations like it or not, they're in the business of creating friendships. If an organization doesn't encourage friendships, its employee engagement -- and, soon after, its profits -- will go down dramatically.”

 

To learn more about building a company environment that encourages relationship-building see our article, “Employee Engagement Equals Customer Satisfaction.”

 


THEFUTURE

 

Opportunities to use their skills

This goes back to feeling challenged, not being bored, and wielding some measure of autonomy. Employees want to develop their skills and gain new ones.

 

A recent O.C. Tanner report uncovered that:

 

  • Almost a quarter of millennials have worked for five different employers, and when they change jobs, it's often because they feel underutilized, stagnant, stressed out and bored at work.
  • Among millennials who worked at five to seven organizations
    • 34% didn't trust their direct manager
    • 31% said their organizations don't set goals
    • 48% said their organization thought only about profits.

Millennials are not a generation to put in 40 years at a single workplace. But you can hold onto your people longer and get more value from them as employees if you offer educational opportunities and give them assignments that focus on the skills they most want to grow.

 


 

Opportunities for advancement

If you want a future with your current employees, they have to be able to see the opportunities available to them if they choose to stay.

 

In a recent article written by DialAmerica (a proud DailyPay partner), we learned a lot about how to encourage employees to lean into a promising future from their current roles.

 

“Beyond employees simply knowing that advancement is possible, it’s helpful to be transparent about current opportunities. We post advancement opportunities in a multitude of ways including on television monitors throughout the [office] and/or through our internal email system.

 

“Employees are encouraged to apply for all opportunities within the center for which they are qualified.

 

“Besides those who are actively interested, we keep an eye on our high performers as well as those who bring relevant outside education and experiences to see who else, internally, might be a fit.”

 


 

Financial security

Your employees don’t necessarily work for the pure love of working. It’s great if they love what they do, but ultimately the job market is so competitive, they’re well aware that they can love a job that offers greater financial benefits than elsewhere.

 

“The State of American Well-Being: Financial Well-Being Rankings” from Gallup-Healthways found that American workers who are financially struggling are:

 

  • 21% less likely to exercise.
  • 33.3% more likely to be obese.
  • 100% more likely to smoke.
  • 21% less likely to be satisfied with the city where they live.
  • 220% more likely to suffer from depression.
  • 128% more likely to have poor health that interferes with usual activities.
  • 38% less likely to feel productive at work.
  • 38% less likely to enjoy their work.

This kind of chronic stress will have these employees jumping ship for a $0.25/hour pay bump.

 

To cut financial stress out of the equation, two easy solutions you can easily start are a financial literacy program and offering a flexible payday solution.

 

In many cases, the combination of these two things can make for a bigger win than wage increases.

 

Consider the fact that the average American pays $1,000 per year in overdraft and late bill pay fees. A $1/hour pay raise for an hourly worker putting in 35 hours per week for 50 weeks out of the year would earn an extra $1750 before taxes. But that incremental amount per week wouldn’t help them avoid that $1000 in fees. Let me explain: people tend to incur a median overdraft fee of $34 on debit card transactions of $24 or less, but they deposit money to cover the charge within 3 days. That’s the equivalent of taking out a loan with a 17,000% APR. Literally.

 

So that raise goes from $1750 - taxes - $1000, which equals just as much financial stress.

 

Why? Because of a well-established cognitive bias called “loss aversion.”

 

“In cognitive psychology and decision theory, loss aversion refers to people's tendency to prefer avoiding losses to acquiring equivalent gains: it is better to not lose $5 than to find $5.”

 

Simply put, losing money is more stressful than gaining money is joyful.

 

Financial stress is alarming to people in the present, but it really gets serious when they start to think forward to the future. Financial Wellness is like a meta-benefit compared to the above-mentioned.

 

Chronically stressed individuals have a harder time finding work-life balance; they lack the mental calm necessary to be creative or learn new skills quickly; and they find it more difficult to develop and maintain relationships.

 

And the American Psychological Association has found that financial stress is the most common and enduring form of stress faced by Americans today.

 

Like we said, hiring people can be hard. But keeping good people doesn’t have to be.

 


 FinLitMo Blog CTA

 

Help Your Workforce Reach Financial Literacy with These Free Educational Resources

Give your employees a reason to stick around. Help them beat financial stress by getting a boost of financial literacy. Click below to download our Intro to Financial Wellness guide, made for Financial Literacy Month but useful all year round!
 
Download
 
 

Written by Brady Walker

Brady Walker is a marketing copywriter based in New York City.


reducing turnover rate, Turnover, turnover rate, wage growth, what employees want, Employee Retention, financial wellness, how to help employees, reduce turnover, employee loyalty

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