Up next, a closer look at turnover rates in the financial services sector,one of world’s largest markets, producing around $63 billion in GDP and employing around 365,000 people in Canada. Financial institutions need to focus on retaining their analysts, bankers, and private wealth managers as frequent turnover in an organization is costly and disruptive to business.
The Financial Services industry has demonstrated a high degree of employee turnover for many years, which has continued to rise. Around 4 in 5 (83%) executives in this industry reported higher-than-normal employee turnover, which they attribute to people finding better-suited employment prospects that provide more flexibility. According to Compdata, Banking & Finance has one of the highest turnover rates of all industries, at 18.6%. In 2017, there was a 27.5% turnover rate, with 16.2% of it being voluntary turnover. This is a slight increased from the overall turnover rate of 26.1% in 2016, where 14.6% of that was voluntary.
Shorter tenures have also been observed, especially for millennials. A PwC report shows that just 10% of millennials in this industry plan to stay in their present position for long term. These shorter tenures have been accredited to shifts in work culture, especially in environment where management faces challenges in maintaining employee engagement. In a Gallup poll, 29% of employees reported being actively engaged. So, this means that 71% of employees felt disengaged in their work environment, ultimately contributing to a feeling of diminished connection to their job. For example, analysts and associates who left their positions in Financial Services in 2015 stayed on the job for an average of 17 months. This is significantly shorter than the tenure of these positions in 2005, which was 26 months.
Employee turnover has several negative implications for an organization, many of which are unfavourable. For starters, the costs associated with recruiting new talent require time and resources for onboarding and education. Softer expenses are also linked to increased turnover. These are intangible expenditures that are more difficult to quantify but nonetheless have a substantial impact on the firm, such as reduced employee morale.
It is estimated every 1% increase in voluntary worker turnover is expected to cost each global bank between $250 and $500 million in annual replacement costs. Replacing mid-level front-office staff in banks can cost more than three times their yearly income. Moreover, a corporation in the financial service industry can expect to pay around half of an analyst’s annual salary, or $50,000 to $100,000, to replace them. Lastly, the cost of turnover is much higher for staff in client-facing or business development positions, ranging from 200% to 400% of their yearly compensation.
In this highly competitive environment, the costs and challenges associated with attracting, engaging, and retaining essential workers can become exaggerated to the point of being impossible to ignore. Voluntary employee turnover can be quite concerning as it shows businesses that they are losing future leaders at an alarming pace.
High employee turnover can have implications in hampering company development. To avoid this, companies must reconsider recruitment strategies, career advancement opportunities, and additional training offerings. Financial institutions must adapt retention strategies to accommodate their employees, making sure to take into account the millennial workforce, given that by 2025, millennials are predicted to account for up to 75% of the workforce by 2025. If they don’t, they risk losing millions of dollars in millennials turnover expenses.
Companies can utilize student loan debt repayment benefits to improve retention and engagement in their workplace to ensure their employees that they are invested in their career development for the longer-term, helping to combat the short tenures described above. Additionally, concerns about the potential weight of postsecondary debt are fueling demand for these employer-assisted loan repayment, with 86% of younger employees indicating they would stay with a business for five years longer if this benefit were offered.
Student loan repayment assistance is a valuable benefit that assists individuals in reducing their financial burden and provides employers with a significant competitive advantage in attracting and retaining employees. These benefits are in high demand due to concerns about the weight of student debt, where around 90% of recent graduates with student loans are seeking employment with companies that provide student loan repayment help. Our team at Ashare is dedicated to assisting graduates by allowing employers to contribute to their workers' student loan burden. With our platform, employees can benefit from faster loan payback by saving money on interest, shortening their repayment period by 30%.