A new report finds that the average turnover rate for organizations with no benefit plans is 157%, while organizations that offer six benefit plan types (e.g., standard health benefits such as PPO/HDHP, vision, dental, life, etc.) saw a 138% decrease in turnover. The report titled “The HR Playbook: Reduce Turnover with Employee Benefits,” identified a link between benefits and turnover by analyzing aggregated data from more than 30,000 USA employers. The report was produced by Human Capital Management company Paycor.
“With unemployment rates hovering near 3.6% – the lowest we’ve seen in 50 years – HR teams and department managers need to do everything they can to reduce turnover and retain their best people,” said Tim Ruge, Director of Product Marketing at Paycor. “Offering benefits to your employees is good, but understanding how to provide the right mix of benefits is crucial to remain competitive, significantly reduce turnover and drive employee engagement.”
Paycor’s findings are corroborated by a 2018 Society for Human Resource Management (SHRM) survey that found “retention/turnover was the top workforce management challenge cited by 47% of HR professionals.” Negative business effects of employee turnover include impact on company culture, time, energy and replacement costs required for hiring (advertising, recruiting, interviewing, onboarding, training and more) and lower productivity for current employees working to cover overflow during the gap of hiring and onboarding. Similarly, SHRM’s 2018 Employee Benefits Report found that companies offering strategic benefits perform 58% better than those that don’t; recruit 19% more effectively and are 28% more likely to retain employees.
Highlights from the report
Benefits Can Reduce Turnover and be a Competitive Advantage: Benefits have a dramatic effect on turnover because, when done right, they offer something for everyone in the company, no matter their age, title or seniority. To make benefits a competitive advantage, plan designers must account for a wide spectrum of wants and needs. For example, Generation X employees place strong value on work/life balance, while Millennial employees are willing to trade high pay for flexible schedules.
High Levels of Well-being Increase Employee Engagement: Organizations are working to engage their employees holistically with programs geared toward physical, mental and social health. 37% of organizations offer health assessments designed to uncover “modifiable risks,” like smoking behavior, physical inactivity, poor diet and high stress. 21% of companies go one level deeper and offer biometric screenings of blood pressure, cholesterol, height/weight, and blood glucose levels. However, to spark real change in the health of employees, companies need to offer a wellness program as part of the benefits package.
Financial Well-being has Appeal Across All Age Groups: There is at least one non-medical benefit that has broad appeal across all age groups: financial well-being. SHRM found that financial anxiety leads to higher absenteeism and lower engagement and the American Management Association (AMA) found that more than half of employees say they believe their employer has some responsibility for their financial well-being. As a result, investing in financial well-being programs (including life insurance, financial coaching, retirement planning, flex spending accounts, etc.) can increase the employee experience and, therefore, the bottom line.
Offering a Benefits Program Is Affordable: Small and medium-sized businesses spend more on comparable health plans than big business because they don’t have the buying power. According to the National Conference of State Legislatures, on average, small businesses paid 8-18% more than enterprise companies. To make benefits affordable, organizations need to find ways to contain costs, without alienating employees, such as cost sharing, investing in technology, offering ‘free benefits’ and more.
Business insights and survey results in this report are derived from a combination of proprietary Paycor data and highly reputable third-party sources, such as SHRM. Paycor’s research on benefits and turnover was based on an analysis of aggregated data from approximately 30,000 Paycor customers nationwide.