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Survey: Cost to Replace Millennials Is Triple the Average

No end in sight for nomadic style, even as Millennials age



It costs, on average, about $8,000 to replace a U.S worker earning just under $40,000 a year. But when it comes to replacing a Millennial—whose average salary tends to be just that—the cost can more than triple, according to a recent survey of HR managers and recruiters.

Nearly nine in 10 respondents to the survey, The Cost of Millennial Retention, reported that they spend between $15,000 and $25,000 to replace each Gen Y employee they lose.

“Considering that approximately 40 percent of [responding companies] currently employ 50 or more Millennial workers, these costs are expected to rise dramatically over the years to come,” wrote the report researchers, who work at Boston-based Millennial Branding, a Gen Y research and consulting firm, and Beyond.com, a Pennsylvania-based career network that connects job seekers with employers. “With current data showing more than 60 percent of Millennials leaving their company in less than three years, employers are facing a very expensive revolving door.”

The online survey of 230 HR managers and recruiters, released in August 2013, found that 51 percent of respondents said the costs of training and development are higher when hiring Millennials than workers from other generations. Those costs include advertising, recruiting, interviewing, hiring, onboarding, training and time to full productivity.

Moreover, 54 percent of respondents said they’re losing Generation Y employees more quickly than older workers. That loss “is seen as a source of stress for companies,” the report notes.

“Companies continue to struggle retaining my generation, and, as a result, it costs them a lot of money and productivity that they could be saving if they created a stronger corporate culture to support them,” said Dan Schawbel, founder of Millennial Branding and author of Promote Yourself: The New Rules for Career Success (St. Martin's Press, 2013).

The survey didn’t identify the cost to replace employees in other age groups. The Center for American Progress, a liberal-leaning think tank, reported in 2012 that the average cost to replace an employee earning less than $50,000 a year (a typical salary for about 40 percent of U.S. jobs) is 20 percent of the worker’s annual salary. Individuals in lower-paying jobs (those under $30,000 a year) are slightly less expensive to replace, at 16 percent of their annual salary, the center reported.

Beyond.com found that the average Millennial salary is $39,700, which would make the average cost to replace a Millennial worker $7,940, according to Center for American Progress calculations.

The U.S. Census Bureau reports lower average salaries for at least some Gen Y employees. In 2011 men ages 25 to 34 (the bureau doesn’t break out income by “Millennials”) earned an average of $32,581 a year, while women in this age range earned an average of $25,723. This would make these workers’ replacement costs $6,516 and $4,116, respectively—far lower than what the survey found for replacing workers in this age bracket.

Joe Weinlick, vice president of marketing at Beyond.com, said the higher replacement costs reported by survey respondents—$15,000 to $25,000—probably reflect Millennials’ relative youth.

“We can infer … from our network’s feedback [that] the training and development of Millennials likely costs more because of their youth and lack of practical on-the-job experience,” Weinlick told SHRM Online.

By 2025—12 years from now—Millennials will account for three-quarters of the workforce. By that time, many of them likely will be married, parents, homeowners or all three.

Weinlick, however, doesn’t think such responsibilities will prevent Gen Y workers from continuing to job-hop if they lack the flexibility, transparency, collaboration, supervisor appreciation and support that research indicates they seek.

“Years ago, people spent their entire career at a company, but today that’s not the case,” he said. “We believe that Millennials’ behavior is indicative of this broad cultural change and that it’s becoming the new norm. To keep these nomadic employees onboard, companies are going to have to work harder to earn their loyalty.”

Nearly half (48 percent) of respondents said they offer flexible work hours in hopes of encouraging Millennials to stay. Forty percent provide mentoring programs—a smart idea given that research shows that Millennials put a high value on workplace coaches. More than a third (37 percent) rely on internal hiring to fill open jobs, in part to address Millennials’ desire for steady career mobility.

“Employees, especially Millennials, don’t want to feel like their careers are stagnant,” Weinlick said. “They long for the ability to creatively express themselves in a variety of ways, and companies that recognize this and capitalize on it will benefit.”

Dana Wilkie is an online editor/manager for SHRM.

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