Studies show the cost of replacing employees ranges anywhere from 30% to a whopping 400% of their annual salary, depending on skill level. In hard numbers, that’s between $6000 - $10,000 to replace someone earning $20,000. And the numbers only go up from there.
But it’s a cost that can be avoided if you successfully reduce employee turnover. So how do you go about it?
To help answer that question, we reached out to CEOs, service business owners, and general managers for their top tips and advice on retaining staff. According to our experts, here are the 8 best ways service businesses can reduce employee turnover.
One of the best ways service businesses can reduce staff turnover starts before employees even sign the contract! Setting clear expectations of the job role’s requirements and company culture during the hiring process enables potential employees to come on board knowing what they’re getting themselves into.
Tanner Arnold, President & CEO of Revelation Machinery, says, “It is essential to be forthright with candidates about the requirements of the position … to avoid any confusion. Do not make assertions that are not true and do not avoid talking about the various scenarios in which people could find themselves. You need to make it absolutely clear to them how many hours they will be working each week and whether they may be expected to work on the weekends periodically.
If you do not speak freely and honestly with your workers from the very beginning, they may come to resent the misrepresentation of their jobs and decide to look for employment elsewhere.”
Investing in quality training and building an effective onboarding process goes a long way to reducing employee turnover. It gives staff the foundation of knowledge needed to do their job, gets them up to speed on how the company operates, and ensures they know who and how to ask for help/advice.
Unfortunately, it’s a solution Guy Peters, Founder of Mop Stars, discovered the hard way. He said, “We found that many of our team members quit at around 4-6 weeks. We were rushing people through training and not supporting them enough. We needed to get people trained and out working to meet demands, but we were putting team members out on their own too early. We reviewed and rewrote our training program and now commit to the full training program with weekly reviews and check-ins, so staff can decide when they feel they are ready to be on their own.”
Money is a powerful motivator, so offering competitive salary and benefits packages is a good place to start if you're looking to increase employee retention. But for smaller start-ups and local service businesses, finding that extra money can be easier said than done.
Luckily, Ingrid Moats of Tampa Bay Test Prep has some great advice when the payroll budget only stretches so far. Aside from being honest and upfront about what you can do to compensate employees, finding ways to acknowledge them in other ways can help reduce turnover. Such as:
Switching jobs can lead to an average salary increase of 10-20%, and with the rising cost of living, that’s a strong incentive for employees to jump ship. So instead of penalizing employees for staying with the company (which can lead to 50% lower income after 10 years of service), reward them by offering pay rises that put them in the same salary bracket as a new job would.
As we saw earlier, the hiring process costs at least 30% of the employee’s salary, so in the long run, that 20% pay rise will save you money.
Another great way to reduce employee turnover is to ensure that your company is a good place to work and that employees are having their needs met. The only way to know if this is true is to ask employees for feedback, whether that’s face-to-face or through anonymous surveys.
Once you have the feedback, act on it. There’s no point asking employees what they want to change and then completely ignoring the answer (unless you’re aiming to increase employee turnover, in which case you’re doing a great job, but you’re reading the wrong article!).
"I will receive feedback from employees that drives me to make changes in the business. I accept that we’re all learning together.” - Jake Romano, GM for John The Plumber
When it comes to increasing employee retention and making the workplace a better place, we could all do with being more like Jake!
A business is nothing without its employees; this is especially true for service businesses that rely on their workforce to represent the company on the job and maintain a quality that keeps customers returning. If you want to reduce staff turnover and boost employee morale in one go, recognizing and rewarding individual and team success is a useful strategy.
And if you think that sounds expensive, don’t worry! As Diana Rodriquez-Zaba of ServiceMaster by Zaba observes, “It doesn’t have to be huge things - even positive reinforcement works great.”
Essentially, if employees go above and beyond, or even just turn up, get the job done, and do it well, tell them. Show them that you see the contribution they make, and you’re grateful for it!
Free lattes and beanbag chairs are all well and good, but what value are they actually adding for your employees?
When it comes to reducing staff turnover, focussing on providing workplace perks they actually want is going to go much further than offering onsite Botox (yes, apparently that’s a thing!)
Of course, the best way to find out what employees value is to ask them, which is exactly what Mop Stars did. “We compensate employees for travel time but needed to step it up with rising gas prices. So we asked everyone what would help. They preferred gas cards over travel pay, so that was an easy change!”
Much more valuable than a quick eye-lift at lunch!
Little to no advancement opportunities was the second leading cause of resignations in 2021 (low pay being #1). So if you’re looking to reduce turnover and hiring costs simultaneously, nurture employees' skills and promote from within. As Phi Dang, Director of Sidepost points out, “One of the best ways to keep your employees engaged in their work is to invest in their training and development. This shows them that you are committed to their growth and development as professionals. By providing them with opportunities to learn new skills and improve their knowledge, you are helping them to progress in their careers. When employees feel like they have the opportunity to advance within the company, they are more likely to stay.”
So there you have it, 8 ways to reduce employee turnover right from the people who do the hiring (and hopefully not the firing). Feel there’s a tip we missed? Share it in the comments below!
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