You know a loyal employee is good for your business, but how valuable is it exactly?
Lower Turnover and Hiring Costs: Long-term employees save the company money on recruiting, onboarding, and training new hires. Replacing an employee can cost up to 6 to 9 months of their salary.
Higher Productivity and Quality: Engaged, loyal workers are often up to 8% more productive, make fewer mistakes, and deliver better service.
Knowledge Retention: Experienced workers keep critical institutional know-how, processes, and relationships inside the company instead of losing them to competitors.
Improved Customer Satisfaction: Employees who believe in the organization project positive attitudes that translate into better experiences and repeat business for customers.
Stronger Culture and Advocacy: Loyal staff act as brand advocates, help recruit top talent, and model positive teamwork.
Let’s quantify that!
EWA offers a 3% operating margin improvement for the average Canadian small business.
A conservatively estimated 15% of your current wage bill is going towards managing employee turnover associated costs. A 20% reduction in employee turnover is the mid-point indicated by EWA industry research and data, which reduces the overall wage bill by 3%.
Add to that the measured productivity improvement of 8% and you have a massive 11% saving in your cost of employment.
Although it varies by industry, for the average Canadian company employment costs make up one-third, or 33%, of their cost base. The 11% EWA benefit adds 3% to the operating margin. The higher your business or industry’s cost of employment runs, the bigger the benefit.
A 3% absolute improvement in margin is staggering in a world where single digit and low double digit margins is the norm. Your business can’t afford to be without EWA.
Calculation detail:
Canadian small businesses annual employee turnover typically runs close to 30% per year. Using an estimate of 6 months of salary being the all-in cost of recruiting, training and on-boarding, we get 15% of the wage bill effectively going toward dealing with turnover.
Research and industry data show that EWA typically reduces employee turnover rates by 13% to 35%, depending on the provider, industry, and workforce demographic. We’ll take a mid-range 20% for these purposes. This is in line with the findings in the Good Business Lab’s randomised controlled trial which found a 21% reduction in worker turnover amongst employees with access to controlled wages.
As a result, EWA is expected to reduce employee turnover to 24% from 30% (a 20% decrease).
The 8% productivity improvement also comes from the Good Business Lab’s trial which covered over 800 workers.