HR Underestimating Job Turnover Problem

February 22, 2007 ( - Human resources professionals may consider employee retention as a top priority, but many are way off the mark when it comes to accurately portraying the volume and seriousness of the problem, according to a new survey.

A news release from compensation consultant said more than 60% of employees surveyed said they plan to look for a new job in the next three months – nearly double the 36% that employers believe are out in the market.

Not only that, but the people doing the looking are often some of the most productive, according to the company. Nearly 66% of workers with three to 10 years of service plan to head for the doors over the next 90 days, according to the survey.

Those losses could be costly. HR professionals estimate that the hard costs to replace an employee range between 33% and 50% of their base salary, in addition to soft costs such as loss of productivity and institutional knowledge, as well as new hire recruiting and training expenses.

Upset About Money

Much of the malaise driving that turnover is compensation related. “It’s no surprise that inadequate compensation leads the list of factors that make employees want to leave a current position,” said Bill Coleman, senior vice president of compensation,, in the news release. “According to the survey, nearly 50% of employees believe they are underpaid. After analyzing the data, we found less than 22% were paid below the fair market value for their job.”

But the sense of being underpaid wasn’t always accurate – at least not judging by what comparable positions earned elsewhere in the market, the company said. The survey showed 15% of respondents were actually overpaid and 33% were paid reasonably close to their fair market value.

Also high on workers’ lists of reasons to stay were good relationships with co-workers, managers and good working hours. This contrasts with responses from HR professionals who rated benefits, job commitment and culture as the leading contributors to employee retention.

The survey also found:

  • Lower-paid employees are more likely to look for a new job than higher-paid workers; 46% of those respondents earning less than $40,000 a year said a new job was in their future.
  • Seventy percent of hourly, non-union employees are likely to look for a new job, making them the most likely segment to leave their current jobs. This compares to 50% of executives who are the least likely to be job hunting.
  • HR professionals greatly underestimate the steps employees have taken in their job search. Seventy-three percent of employees have updated their resumes, compared to only 32% as estimated by HR professionals. Nearly 80% of employees have surfed online job postings while HR estimates that only 40% had done so.

The use of counter-offers or pro-active pay raises could help correct pay inequity, according to the news release. Survey results show many of the underpaid employees could be persuaded not to leave with a small pay adjustment. In fact, the majority of employees said that a 10% to 15% pay boost would be enough to overcome their perceived or real pay shortage – an amount far less than what HR reported it would cost to replace a key employee.

However, many HR professionals who use counter-offers come up short, averaging only 8% – below the employee hurdle to stay.

The survey covered 10,972 employees and 311 human resource or other company representatives.