The recent Federal Trade Commission’s (FTC’s) final rule banning non-compete agreements for workers, subject to certain limitations, has sent waves through companies big and small that have often used non-compete agreements to help restrict workers’ mobility from jumping ship to competing companies.
If the FTC’s rule goes into effect as currently written (with the rule now expected to take effect in September, if not enjoined by litigation), it will generally prohibit new non-compete agreements and render existing non-compete agreements with workers unenforceable, with exceptions.
While lawsuits are contesting this rule, if the rule goes into effect as published, this rule may make it far easier for your best and brightest talent to become your biggest competitor’s best and brightest—an alarming scenario for smaller businesses that are already competing with larger organizations for talent.
Employees in states that don’t already limit non-competes would have more freedom to move between employers within the same industry, which can help increase competition for talent. And employers who used them may no longer be able to rely on non-compete clauses to help retain top performers, which could lead to increased turnover, especially in high-skill sectors. That is, of course, if you don’t get creative in keeping them.
In addition to lost productivity and employee morale, there can be a real impact on turnover costs to replace your employees who leave for what they think are greener pastures with competitors.
According to the Society for Human Resource Management (SHRM), the average cost to hire a new employee is $4,700, and the average cost of onboarding is $4,100. However, the total cost to hire an employee can be as large as three to four times the position's annual wage.
So, besides offering more competitive pay (the FTC estimates the non-compete rule will result in a $524 pay boost for the average worker), what can you do to help retain your workers who may be wooed by competitors if you can’t rely on most existing non-compete agreements? For many workers, benefits can be a differentiating factor. A 2023 study showed that more than half of the employees are somewhat likely to accept a new job with lower pay but with more generous benefit offerings.
Offering workers better benefits can significantly help reduce attrition by addressing their needs and improving job satisfaction. Here are some top ways:
Overall, offering workers benefits demonstrates a commitment to employee well-being, fosters loyalty, and helps to attract and retain top talent, all of which can contribute to reducing attrition at a small business.