November 16, 2021 | By Brandon Hartsaw
Controlling costs is among the most challenging components of business, especially when it comes to HR costs associated with high employee turnover. According to the U.S. Bureau of Labor Statistics July 2021 Job Opening and Labor Turnover report, employee turnover is more prevalent than ever as we experience a series high of 10.9 million job openings and more than 4 million employees quit their jobs over the 12-month period.
This challenge to reduce HR costs rings especially true for a white-collar company because turnover costs hit their businesses harder since the average salary is higher than blue-collar workers. Moreover, the cost-per-hire of white-collar workers will generally be higher than blue-collar workers because it also costs more to replace a white-collar worker versus a blue-collar.
Here is how white-collar companies save on HR costs even though they're impacted the most by employee turnover.
There's almost nothing more detrimental to your bottom line than employee turnovers. According to Legal Jobs, an employee's leaving can cost the company on average 33% of their annual salary, and the cost of replacing a trained employee can be more than 200% of their salary. This means average turnover costs can be around $15,000 for a median employee salary of $45,000.
Zippia reports that the average cost per hire is $4,425. However, the specifics of cost-per-hire depend on your hiring costs, such as employee salary and days required to hire a new employee. Using the additional statistic that "it costs up to 40% of an employee's base salary to hire a new employee with benefits," you could be looking at $12,000 for a base salary of $30,000, $18,000 for a base salary of $45,000, and $30,000 for a base salary of $75,000. To calculate your cost-per-hire, follow the formula: Cost Per Hire = (Internal Costs + External Costs) / Number of Hires
Additional cost factors to consider:
An Employer of Choice is one that workers choose to work for even when they have alternative options. You can reach this status for a number of reasons, but it often requires one or more of the following:
Either way, this means more talent will be willing to seek you out for a job, hoping an opportunity opens up for them. This will allow you to attract top talent to you without the added effort — which, in turn, lowers the time spent recruiting and interviewing.
Likewise, it also increases retention which means less hiring is needed. In these wonderful cases, you can kick all those hiring costs to the curb and benefit from high employee retention, which can maximize a company's profits up to 4X.
Outsourcing specific HR functions can lower the cost of turnover by attracting and retaining top talent. It's also more cost-efficient than internal HR teams:
An internal HR team can increase a company's hiring cost by as much as 50% or more — meaning an additional HR employee making $51,000 a year can cost your company around $4,250 a month in additional hiring costs.
Other benefits include the following.
Professional Employer Organization (PEO) is the most comprehensive HR outsourcing solution available. Not only are they the only ones able to offer direct cost-savings on employee benefits like health plans, but they cost the same as less comprehensive HR outsourcing solutions like Administrative Services Organization (ASO). Take charge of your white-collar business by outsourcing your HR today.
Acting as the Chief Operations Officer, Brandon actively promotes an environment of creativity, collaboration, and individual ownership to empower Questco team members to deliver exceptional client experiences.