Employee turnover is often considered one of the largest costs in many organizations, especially in today’s competitive labour market.

The Society for Human Resource Management (SHRM) estimates that the actual cost of losing an employee can be up to 30 to 50% of their annual salary for entry-level employees, 150% for middle-level employees, and up to 400% for specialized, high-level employees. The study also points out weak employee loyalty as one of the most common reasons why company retention efforts fail.

At the same time, an increasing number of employees are questioning our government’s ability to support post-retirement benefits, given the large population of retiring baby boomers. As a result, many employees are looking for better supplementary retirement income sources for their future financial security.

So what can companies do better to strengthen employee loyalty, while helping them address their retirement needs

Group Savings Plans, like Group RSPs, can give companies the tools to start.

A Group RSP can provide a valuable benefit and reward mechanism to deepen employee loyalty and attract and retain the right people.

With a Group RSP, employees can:

• Reduce their taxable income by contributing pre-tax dollars to their plan.

• Control their investments to ensure a diversified portfolio that meets their individual needs.

• Receive tangible financial benefits that can significantly increase the value of their retirement savings and their loyalty to their organization, especially when organizations match employee contributions.

Another issue expressed by employees is the need for assistance in selecting investments within their benefits program. A recent article appearing on Advisor.ca entitled “Retirement planning big priority for 30-year-olds: Study” on June 8, 2007 by Mark Noble states that 60% of respondents said that the most important feature their company could provide in managing pension assets would be access to professional financial planning advice.

Ongoing personal investment advice is a key part of helping your employees identify and achieve their financial goals. It not only helps them reach their objectives, but also provides personal guidance through the investment selection process — a benefit no electronic calculator can provide.

Bottom line

Some companies may hesitate to adopt new structures and programs. They can feel overwhelmed about the amount of effort and time involved in plan administration. Smaller companies may not even realize the need to reward their employees or may think that they cannot afford benefits or compensation programs.

But companies without benefit programs tend to have higher employee turnover rates, which affects the bottom line. One source estimates that a 10% reduction in employee turnover is worth more money than a 10% increase in productivity or sales. This shows the significant value of retention efforts and their contribution to a company’s bottom line.

By clearly showing what makes working at your company rewarding, you can experience significant improvement in employee loyalty, which can translate into lower costs and higher profits.

This article was supplied by Colin MacAskill, a financial planner and investment advisor with RBC Dominion Securities Inc. He can be reached at 604-257-7455.