How a major retailer reduced turnover while saving millions of dollars in replacement costs in the first year.

The Challenge
The subject of this case study is a major retailer with upwards of 125,000 employees at more than 1,200 locations in over a dozen states.

In a highly competitive and low-margin industry, this company is extremely cost conscious. With the trend in the industry moving toward larger units, the company was investing heavily in capital improvements. Since these changes do not translate into immediate returns on investment, an even greater than usual focus was placed on containing, if not reducing, operating expenses.

Seventy percent of its work force is comprised of part-time employees with a turnover rate approaching 140%. The company estimated that each percentage point of lowered turnover represented an annual savings of $1 million. Thus, it became a priority to find a turnover reduction strategy.

Internal reviews and surveys suggested that added benefits might play a role in retaining core “part-timers.” It was also believed that benefits could help with recruiting efforts in a market characterized by growing competition for a shrinking supply of new workers.

The company’s Director of Human Resources (HR) turned to its long-time broker for vendors who had the experience and resources to effectively deliver such benefits. We were selected to join the development team.

The Goal
The goal was tri-fold: To decrease turnover, increase the company’s attractiveness as an employer of part-timers in the marketplace and improve employee well being.

The Solution
We provided a fully-insured, voluntary medical, dental, term life and vision care coverage program for employees over the age of 18 who had worked for the company a minimum of six months. The premium was payroll deducted and, in this case, the company opted to subsidize 50% of the weekly medical coverage rate for all who enrolled.

Working with HR and the broker, we developed the communications materials, the method and timing of distribution and a system of automated data exchange – the last being the key to easy administration of the program. The program was established with three communication strategies:

1. A strong corporate commitment communicated from the top down – throughout the organizational structure.
2. Clear, simple materials describing the program to the eligible employees and their supervisors.
3. Personalized enrollment packets, prepared for each eligible employee, containing a newsletter, brochure and enrollment form.

A weekly modem data transmission, from the company, was set up to communicate the enrollments, new hires and premium deductions.

Using the data gathered weekly, we populated our Claims and Customer Service databases, which had instant access to enrollment and plan information. SRC also administered the premiums, remitting them to the carriers and vendors. Summary Plan Descriptions and ID Card packets were prepared and sent to division offices for distribution to the enrolled participants. Following the annual open enrollment and throughout the year, we prepared personalized enrollment packets for each employee, after five months of service.

The Results
The benefit plan was introduced to eligible employees in June and initial coverage was effective on July 1, of the same year. Early tracking reports exceeded the expected results – opening participation in the medical plan was 24%.

At the end of the first year, the program’s impact was clearly established; employee turnover was reduced by 16%! The savings represented over a 400% return on the employer’s investment in the subsidy of the medical premium.