This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
The UK’s median employee turnover (“churn”) rate is 15%, according to the CIPD (Chartered Institute of Personnel and Development). Alarmingly for employers, replacing a mid-level employee can cost over £30,000 when costs such as temporary worker hire, lost productivity and training are taken into account.
Employers benefit from keeping good staff on their books. Yet, how can this be achieved? Below, our financial planners in Burnley explore some practical ideas for building a loyal workforce in 2024. We hope these ideas inspire both employers and employees to build more mutually beneficial partnerships.
Please get in touch for more information or to discuss your own financial plan with us.
What causes employee churn?
There is no single variable explaining why employees leave their jobs. One recent study suggests that 6.5m employees are currently thinking about resigning, despite a challenging economy and jobs market, for at least four main reasons:
- The desire for better pay and benefits (35%).
- Wanting increased job satisfaction (27%).
- Seeking a more equitable work-life balance (24%).
- Desire for a different type of work (23%).
This is where business financial planning can help with employee engagement and retention. If over a third (35%) of employees seek a better financial deal, how can employers approach this issue sensibly (especially if market conditions constrain profits)?
The importance of research
Each industry is different, and so are the workers within each industry. Some industries (e.g. hospitality) are notorious for their structurally low wages, contributing to higher churn rates. Others, however, can grant employers more flexibility to offer competitive worker packages. The result can be more workers who stick around for longer, boosting overall productivity and profits.
Naturally, the starting point for an employer is to have a robust recruitment process to identify and attract the best workers. Here, consider looking at your existing “best” workers and note their common traits. Then, look for those traits as you examine different candidates.
Secondly, consider asking these workers what they look for in a pay and benefits package. Of course, this needs to be done delicately (you do not want to “rock the boat” with your best people). However, research is invaluable when crafting financial incentives to reduce churn.
Another approach is to examine your wider industry and your nearest competitors, examining what pay and benefits are on offer. Could your best people be lured away by better deals elsewhere? Could you be losing new ideal candidates due to your sub-par job offers?
Going beyond pay
It can be easy to assume that the best workers simply want better pay than they could achieve elsewhere. However, this is not always the case.
Indeed, some employees may want more benefits to reward their productivity instead of a pay increase if they enter a higher income tax band—e.g., going from £50,000 to £55,000 (which can lead to lower marginal utility rates).
Fortunately, a business financial plan can help owners craft suitable benefits to address such issues. For example, pension benefits could be a powerful incentive for workers to remain loyal and boost productivity.
One idea is to offer a “contribution matching” scheme. Here, you agree to increase your employer contributions to your employee’s workplace scheme if they increase their own contributions (e.g. up to a limit of, say, 10%).
This can be very appealing for workers starting to focus more on their retirement plan, which might occur for workers in their 40s and 50s. It can also be quite tax-efficient for employers since National Insurance (NI) does not need to be paid on employer contributions.
Showing employees that you care
One of the best ways to cultivate worker loyalty and engagement is for employers to show genuine interest in workers’ lives and offer training, tools and benefits which help to safeguard their aspirations and finances.
Here, employers could consider a range of options for benefits packages, such as group life insurance (reducing the need for workers to take out their own policies) and enhanced sick pay benefits – e.g. going beyond Statutory Sick Pay in money amounts and duration.
Another idea is to include private medical insurance (PMI), giving workers more healthcare options if things go wrong. Employers might also offer dental insurance to workers, group critical lllness cover or “death-in-service” benefits.
These types of benefits amount to financial protection incentives for workers rather than simply offering pay rises. They can also open up more tax planning opportunities for employers. For instance, group life insurance premiums can be listed as an expense, thus potentially reducing corporation tax.
Invitation
Crafting financial incentives is just one pillar in an employer’s wider recruitment and retention strategy. However, getting the balance right could make a huge difference to your long-term worker turnover and productivity, potentially impacting your bottom line and growth trajectory.
If you are interested in starting a conversation about your own financial plan or business financial plan, then we’d love to hear from you. Please contact us to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Reach us via:
T: 01282 772938
