The loss of key employees has an impact on any organisation, but the consequences can be particularly acute for small and mid-sized businesses. Apart from the costs of replacement, the disruption involved can also have a disproportionate operational impact. Fortunately, as Mark Hussain, Global Head of Commercial Insurance & Investments at HSBC explains, there are various incentives and benefits that can be used to maximise employee retention
The fallout from a key employee leaving is now widely accepted as a significant business issue. In a 2012 Hay Group survey of 682 businesses, 81 per cent of respondents said that key employee turnover was very costly for the organisation, while 68 per cent said key employee retention was a current major concern of senior management. The costs associated with an employee leaving include the employee's own reduced productivity (while searching for another job), costs of covering his/her role up until the time a replacement is recruited, the loss of any training investment, the lower productivity of a replacement while they learn the job and direct recruiting costs.
In purely monetary terms, this is expensive enough, but there are also the social capital costs of turnover. This includes disruption to social networks within a business that are integral to its collaborative performance. This disruption can have a material impact from a customer’s perspective, particularly where an employee played a link pin role between interdependent departments. In addition, some customers regard their commercial relationship as being with a key individual rather than the business for which that individual works. If that individual moves to join a competing firm, those customers could move with them.
An essential element in avoiding all these potential costs and disruptions is to ensure that employees feel truly valued. This goes beyond remuneration and day to day conditions of employment to include longer term factors.
Healthcare is a good example of the sort of provision that is likely to increase employee loyalty. In addition to private medical insurance for an employee (and possibly also for their immediate family) this can also include more general wellbeing or preventative health consultancy/screening. A similarly worthwhile provision is income protection (sometimes referred to as permanent health insurance) which maintains a proportion of an employee's salary payments should they be off work through certain illnesses.
Group pension schemes are one obvious way of ensuring employees feel valued, especially if they can be delivered in the most efficient way possible from the employee's perspective. One example of this is through salary exchange, where instead of making contributions from their gross pay employees can swap some of their gross salary for an equivalent pension contribution, which can legitimately save on certain employment taxes or charges (such as UK National Insurance).
Another solution that can help to maximise employee retention is group life cover. This is an efficient way of providing life assurance for employees, usually at relatively low cost and with reduced or no medical underwriting requirements.
Although there is a range of insurance and pension solutions available as aids to employee retention, not all will be appropriate in all cases. The individual circumstances of both employers and employees obviously vary considerably, so there is a need for impartial due diligence before the most suitable solution, or combination of solutions, can be considered.