Retaining employees vs hiring new ones: which is best?
Did you know that the average cost of replacing an employee is over £30k?
This eye-opening statistic highlights the significant financial impact of employee turnover and sets the stage for a critical business decision: investing in retaining employees vs hiring new ones.
Let's delve into the pros and cons of both strategies and why retaining employees is often the better choice.
Why is it important to retain employees?
Employee retention is a cornerstone of a successful business strategy.
Keeping your talented workforce not only enhances productivity but also reduces operational costs.
Let’s look at some specific benefits of retaining staff.
Benefits of retaining older employees
Retaining employees offers numerous advantages, both financially and culturally, that new hires may not bring immediately.
Pros of retaining employees
1. Cost Efficiency:
The cost of hiring new employees vs retaining them is much higher. Recruitment alone costs a business between 20% to 30% of an employee’s salary, and that’s before you add on training, pension, office equipment costs and national insurance.
Additionally, the onboarding process is time-consuming and costly. Onboarding a new employee takes time, and it takes a while for them to reach optimal efficiency. In contrast, retaining existing employees avoids these costs and allows businesses to invest in other critical areas.
2. Enhanced Productivity
Existing employees are already familiar with company processes and culture. They can hit the ground running each day, ensuring continuous productivity. New hires cannot immediately match this. In fact, some reports suggest that it can take as much as twelve months for a new hire to become truly productive.
3. Boosted Morale
A stable workforce contributes to higher morale. Employees feel more secure and valued when they see their employer investing in their development and wellbeing.
4. Institutional Knowledge
Experienced employees have a deep understanding of the company's goals and ways of working. This knowledge is invaluable and can significantly enhance efficiency. In addition, long-term employees often form strong relationships with clients and customers, fostering trust and continuity.
Are there any drawbacks to retaining employees?
The short answer is yes.
Retaining employees can sometimes stifle innovation and fresh perspectives, as long-term employees may become resistant to change and new ideas. However, having a mix of long-term employees and new talent can avoid this and drive innovation.
Also, retaining experienced employees often involves offering competitive salaries which can be a financial burden on businesses. However, this cost is significantly less than the overall cost of hiring and training new employees.
So which option is better?
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The cost of hiring new employees vs retaining
Managing expenses is crucial for any business.
As we’ve seen, the cost to hire new employees can be very high. Although hiring new talent can bring fresh ideas and skills, it also comes with high costs for recruitment, training, and integration.
In contrast, keeping your current employees can save money and improve stability and productivity.
Understanding the cost of hiring new employees vs retaining them is key to making smart decisions that benefit both your budget and your workforce.
Investing in the cost of retaining employees vs hiring new ones often proves more economical.
But how can you encourage your staff to stay? Read on to find out.
Utilising benefits to retain staff
Understanding why it is important to retain employees can help businesses develop effective strategies to enhance loyalty, reduce turnover, and maintain a productive workforce.
To maximise the benefits of retaining older employees, businesses should invest in a comprehensive benefit package. Here are 4 effective strategies you can put in place today:
1. Professional development
No one will stick around if they feel they can’t make progress in their career.
Offer opportunities for continuous learning and career advancement to keep employees engaged and motivated. You’ll reap the benefits of their experience.
2. Promote a positive working environment
Employees will run if a work environment is toxic or too stressful to work in long term. So, aim to create a positive environment that nurtures and encourages.
Utilise tools such as Reward and Recognition platforms to build a sense of community, even if your team is remote. These platforms allow you to publicly praise those who are working hard and distribute gifts as rewards.
3. Health and wellness programmes
There’s no doubt that ensuring your current employees work optimally is essential if you want to get the best from them. Make sure that you provide a comprehensive wellbeing programme that covers all aspects of a person’s wellness, including:
- Physical wellbeing
- Mental wellbeing
- Social/emotional wellbeing
- Financial wellbeing
Invest in benefits such as wellbeing coaching, and mental health support to ensure you’re caring for your staff.
4. Retirement Plans
Investing in a great pension scheme is crucial. A robust retirement plan not only provides financial security for long-term employees but also serves as a significant incentive for staying with the company. Ensure your pension scheme is top-notch by speaking to a pension consultant.
By contributing to your employees' future stability, you demonstrate your commitment to their long-term employee welfare. Your employees feel a sense of loyalty to you and this helps to reduce turnover.
Keep your best and invest in success
When considering the cost of hiring new employees vs retaining, it's evident that retaining staff is often the more advantageous strategy. Not only does it save on recruitment and training costs, but it also boosts morale and maintains productivity.
By investing in a benefits package and creating a supportive work environment, businesses can reap the benefits of retaining older employees and ensure long-term success.
