Accuchex Blog

Employee Retention Can Be More Cost-Effective Than Hiring

Posted by Leslie Ruhland on Aug 1, 2018 12:09:03 PM
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While it is a fact of business life that employees leave and new hires are needed when businesses grow, it is still far more cost-effective to retain good employees than to bring on new hires.


For most organizations, payroll represents the largest category of costs and overhead. Having employees, especially in states like California, is an expensive undertaking. However, being aware of the actual costs of hiring new employees is important.

In addition to the required family leave, paid sick leave, and other costly employee benefits, employers in California must budget for the increasing minimum wage scale. While these costs are unavoidable, the added costs of finding, recruiting, and hiring new employees can be extensive.

For this reason, pursuing a strategy of replacing less-than-stellar, or aging, workers may not be the most cost-effective approach. And losing good employees can be fiscally damaging to organizations that find themselves continually replacing lost workers. 

The bottom line is that, short of experiencing sustained growth and the need for additional workers, employee retention is the smarter strategy.

Replacing Workers Can Cost Far More Than Keeping Them

Too often, owners or managers simply look at salary costs when considering replacing a current employee. But there is far more involved when it comes to a new hire than the prospective salary being considered. Employers must consider the accumulated costs of recruiting, screening, interviewing and hiring, as well as training and onboarding the new hire.

Depending on the position being filled and the type of business, these costs can easily add up to thousands of dollars.

In addition, Replacing a long-time employee doesn't simply result in having a new person at a lower salary. It represents a loss of skills, experience, knowledge and relationships within and without the organization. All of these intangibles cannot be easily replaced - if they can be replaced at all. 

And there is the impact on employee morale and the perception engendered by management if this course is pursued actively. No one is comfortable with seeing colleagues being let go and then replaced with younger, or less experienced, workers. 

Not every new employee hired will end up costing a company tens of thousands of dollars. Yet, while this may be true for executive level employees, even an $12 an hour employee can end up costing a company over $4,000 in both direct and indirect turnover costs.

And, in addition to the hiring costs, there is always the risk of discovering a company has made a poor hiring choice and now has to let them go and find another replacement.

The Competing Arguments of Acquisition or Retention

Employers in California are painfully aware of the the costs involved with bringing on new hires. For example, the employer contributions to payroll taxes in California are among the highest in the nation along with the mandated minimum wage floor.

And, despite the growing economy, California still ranks near the bottom out of 50 states in regards to the business tax climate. Given the burden that salaries have for most business, maintaining cost-effective payroll management and human resources is a priority for California businesses.

So, with new job growth and the opportunities to possible replace current workers as well as bring on additional employees, what's the best course of action? 

This infographic offers a visual breakdown of the pros and cons of hiring new employees or retaining them:



[Graphic courtesy of]

Your Professional Team for Payroll Management

Along with making wise hiring decisions, a key strategy for reducing overhead, employee costs, and streamlining operations is to outsource many of the time consuming and labor intensive processes. For most businesses, the most strategic option is to outsource their payroll management functions.

A professional agency such a Accuchex can provide much-needed help with Human Resources needs and questions. Accuchex is a full spectrum Payroll Management Services provider offering expertise in Time Management, Insurance and Retirement issues, as well.

If you are looking for reliable resource for your HR issues, we can help. Get your Free Download: Payroll Outsourcing Guide to help you make an informed decision, or call Accuchex Payroll Management Services at 877-422-2824.

In addition, we invite you to take a tour of Time2Pay - it makes payroll easy.

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Topics: recruiting and hiring, new hire, employee turnover, company culture, employee engagement

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