by David B Hitchcock

Created on: May 27, 2011

How to reduce the cost of employee turnover through the employee lifecycle

When a company hires a new employee, it costs money. It costs more money to train that person. There additional first time setup costs as well when an employee starts with a company. All these costs quickly add up, so its not surprising that companies want to reduce these costs as much as possible. Here are 7 ways to reduce the cost of employee turnover throughout the employee lifecycle.

-Have employees sign a contract or agreement

This may seem crass, but if the employee signs an agreement not to leave until they have been there for a set period of time has benefits. The employee knows up front what is expected of them and for how long. Also there are often payback clauses if the employee leaves during this time, which allows an employee to weigh their options later on if they decide to leave early. For the employer it gives them legal grounds to recoup the costs associated with new employees in the case of early departures.

-Offer free career planning services

If a company takes an active interest in the career of employees, those employees will want to stay with the company longer. The career planning helps employees see their path of promotion within the company. That path may not be the same outside the company, so this planning would have to start over again. From the company point of view, this planning service is an opportunity to determine what employees want to make them feel happy or fulfilled – more training, more pay, more days off, or such. The company can then use this to improve their compensation packages.

-Offer better compensation over time

New employees expect to start at the bottom for benefits. But over time they expect to get more days off, pay raises, and other benefits. As a company offering more frequent increases in benefits earlier in an employee’s time with a company will result in a lower employee turnover rate. Employees will have tangible and achievable goals with relevant rewards. This is especially true if other companies offer fewer such benefits or offer them only to more senior employees.

-Make stock options part of hiring packages and annual reviews

Stock options allow an employee of a publicly traded company to purchase shares in the company at a price that is lower than the current market price for those shares. The employee can then hold on to the shares hoping they will increase farther in value, or sell them immediately for a profit.

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