Here’s why a raise may cost less than letting an employee quit.
A recent study from the Center for American Progress found that the average cost of replacing an employee earning less than $50,000 per year (more than 40 percent of U.S. jobs) amounts to 20% of the person’s annual salary.
The organization came to these conclusions after examining 30 case studies from 11 research papers published between 1992 to 2007. Most of the loss comes from productivity decreases when someone leaves a job, the costs of hiring and training a new employee and the slower productivity until the new employee gets up to speed in their new job.
High turnover for lower-paying jobs (those under $30,000 a year) are slightly less expensive to replace, costing a business only 16% of the annual salary. But how about losing an executive? The Center found that the cost of losing an executive is astronomically high — up to 213% of the employee’s salary.
Obviously it’s a case-by-case scenario when an employee asks for a raise, but this study should certainly give you an idea of what kind of cost our company may take on if that request is rejected and the employee decides to hit the bricks.
What do you think about this study? Is accommodating an employee’s request for a raise a better idea than the cost involved with replacing them? Let us know in the comments below.