Comparing the costs of a retirement plan to employee turnover

Woman analyzing employee turnover cost savings

How adding retirements benefits can save you money

With employers under pressure to stay on budget and reduce expenses, it may seem counterintuitive to consider adding a group retirement plan to your employee benefits package. However, research shows that retirement benefits offer a powerful way to help organizations avoid employee turnover costs. So how do you go about calculating the dollars-and-cents ROI of introducing a group plan?

In comparing the likely cost of a retirement plan with the potential savings in reduced turnover cost from having a plan, there are three main parts to this analysis:

    1. Determining the cost of turnover
    2. Determining the cost of a new retirement plan
    3. Estimating the impact of the retirement plan on turnover

Employee turnover can be reduced by 20-60% with a group retirement plan in place


The cost of voluntary employee turnover

While organization leaders intuitively understand the pain of valuable employees walking out the door, many have not tried to measure the real impact of employee turnover. Learning just how expensive it can be to lose an employee will help you improve your recruitment and retention efforts. For those who haven’t done this calculation before, the formula for the annual cost of voluntary turnover is:

Cost per departing employee x number of departing employees / year
(i.e., turnover rate x total number employees)

In figuring out the cost per departing employee, you should consider these items:

    • Off-boarding costs – knowledge transfer, exit interviews, unpaid vacation, and lost productivity by the departing employee
    • Recruitment costs – time to define the new position, job posting and advertising fees, external recruiters, resume screening, interviews, reference checks, hiring bonuses, relocation costs, cost of other candidate evaluations
    • Onboarding and training costs – training, management and coaching time by the team to bring the new employee up to speed
    • Lost productivity (ramp time) – time it takes for the new employee to become a fully productive member of the team, which can vary widely by role and industry
    • Other costs resulting from a resourcing gap – slower client service, delayed product development, increased operational mistakes, and low employee morale during the time it takes to recruit and ramp up a new hire

According to Gallup, these costs can add up to between 50% and 200% of an employee’s annual salary. 2021 survey of Canadian hiring decisionmakers conducted by The Harris Poll found the total to be about $22,000 per year on average, or about 36% of the average wage. This survey found that per-employee costs increased with company size, with 35% of companies with 100+ employees saying that turnover cost them over $50,000 per employee.   

If you are dealing with a workforce with less specialized skills where recruiting and ramp time is lower (weeks not months), you might use a number between 20% and 50% of a year’s salary. If the workforce has more specialized skills and recruiting and onboarding timelines are longer (months not weeks), you might want to use a range of 100% to 200% of a year’s salary.


Number of employees100
Turnover rate30%
Cost per departing employee$17,500 (35% of average salary of $50k)
Cost of turnover per year$525,000


The cost of a retirement plan

Calculating the cost of a retirement plan considers these elements:

    • Employer match costs: Calculate your match using an average participation rate of 70%.
    • Setup and administrative costs: Determine the internal costs associated with administering a retirement plan, which can be higher when using a provider without modern technology and payroll integration.


The impact of the retirement plan on turnover

Research indicates having a workplace retirement plan has a significant positive impact on retention. For example, a 2022 study by the US HR tech firm Gusto found that having a retirement plan reduced the risk of quitting by 40% during an employee’s first year. The Center for Retirement Research conducted a 2006 study that revealed offering a retirement plan increased employee tenure by between 2.7 and 5.8 years, depending on the type of plan. This represents a reduction in turnover of between about 34% and about 74%. Through Common Wealth’s research with the Healthcare of Ontario Pension Plan, Canadian employers ranked retirement benefits as the #2 most powerful tool for retention, behind only pay and ahead of things like health benefits, disability insurance, and work-life balance.

You might use a range of 20%-40% reduction in turnover if dealing with a higher-income group, and 50-60% if dealing with a lower-earning group. 


The bottom line


Number of employees100
Turnover rate before retirement plan30%
Cost per departing employee$17,500 (35% of average salary of $50k)
Cost of turnover per year (before introducing plan)$525,000
Cost of plan (3% match, 70% participation, RRSP/TFSA plan design)$107,000 ($105,000 for matching, $2,000 for staff time for administration)
Turnover reduction from introducing plan50% (from 30% to 15%)
Turnover cost savings from introducing plan$262,500
Net benefit (cost) from introducing plan$155,500
Return on investment145%

The result from this example is more conservative than a similar analysis conducted by Gusto, which showed a return on investment of between 168% and 240% for similar types of employers. Still, there is a significant net benefit and a return on investment of over 100%.


Introducing a group retirement plan an have an ROI of over 100%


Let’s work together

Get in touch if you’d like support with turnover cost analysis to see how much a group retirement plan can save you.

The most impactful cost to cut in 2023: Employee turnover

By now, most experts agree that Canada is headed for an economic cooldown in 2023, but it’s likely to be short-lived – and it probably won’t take the heat off the ongoing talent shortage.

When times get lean, organizations depend on a skilled and engaged workforce to help them stay resilient. But, as new reports show, higher inflation is driving up employee financial stress – draining productivity and ramping up flight risk.

At a time when employers need to minimize disruption and find ways to trim back operating costs, one budget line item stands out as a natural opportunity for savings: the high cost of employee churn.

But what’s the best way to convince their best talent to say – without breaking the bank?

Employee turnover costs organizations big

According to a survey from Express Employment Professionals, more than one-third of Canadian companies (35%) say employee turnover has increased compared to last year, a significant rise from the 24% who said the same thing in 2021.

When employees leave, the organization takes a hit with direct expenses like paying out accrued vacation time and recruitment costs. But there are also indirect costs, like the loss of institutional knowledge and slowed productivity from a smaller team. And depending on the role, replacement costs can escalate.

Turnover costs


A new report from Gusto suggests the cost to lose an employee can be anywhere between half and twice the amount of an employee’s annual salary. That means for a organization with 20 employees making $95,000 per year, losing 3 employees could cost the organization between $142,500 and $570,000 to recruit, train, and get back up to previous levels of productivity.

… And many employees are looking for greener pastures

The percentage of working Canadians looking to make a move has jumped to 50% from only 31% in June 2022, according to Robert Half.

This may not be a complete shock, considering that employee financial stress is at its highest recorded point since the 2008 financial crisis.  A Ceridian survey found that six in ten (61%) employees say they’re stressed about their finances, and most (82%) say they spend time at work thinking about their financial situation. In Canada, this adds up to $50B in lost productivity.

50% of workers plan to look for a new job in the next six months

Retirement benefits can help organizations stay resilient

Creating strong reasons for employees to stay is critical in 2023. A happy work culture, competitive pay and great retirement benefits are key.

According to a recent HOOPP and Angus Reid Group report, the majority of employers say that retirement benefits are a cost-effective way to reduce financial stress, boost productivity and encourage staff to stay long-term.

The Gusto report goes on to say that an employee with a retirement plan has a 40% lower chance of quitting by the end of their first year and with an estimated annual cost savings of more than $100,000 for small and medium-sized businesses.

66% of employers say retirement benefits help retain talent. 85% of employers say retirement benefits are a cost-effective way to reduce financial stress. Companies with retirement benefits are more likely to report improved productivity than those that do not.

At a time when every dollar counts, help your team’s savings go further

If you have a retirement plan with low fees, world-class investment management and an easy digital experience, you’re well on your way to helping employees get the best value for their savings. To encourage even greater retention, you can also consider increasing your employer match based on tenure.

To learn more about setting your matching options, or to set up a workplace retirement plan that will help your organization stay the course, talk with your advisor or book a consult with our team.

Year-end tax reporting deadlines for 2022

At the Common Good Plan, our job is to make workplace retirement benefits easy to manage – especially at year-end.

To help make sure that all of your 2022 payroll contributions are counted for this tax year, and your employees get the tax documents they need, here’s a preview of what you’ll need to do and when.

1. Update your payroll register by December 28, 2022

To ensure that December plan contributions are processed before the end of the year, please upload your final payroll 2022 register in the Employer Dashboard no later than 12 noon (EST) on December 28, 2022.  

What Common Good will do

Once we’ve finalized your 2022 contributions, we’ll provide the annual TFSA information return to the CRA and provide all plan members with their RRSP contribution receipts (one in February and another in late March). If any plan members have withdrawn RRSP savings in 2022, they can expect a T4RSP from the Common Good Plan in February 2023.

2. Include employer RRSP and TFSA contributions on T4s

When preparing T4 slips, please include employer RRSP and TFSA contributions in Box 40 (Taxable Benefits).

2022 RRSP deadline and limits

  • The last day to make a 2022 RRSP contribution is February 28, 2023.
  • The 2022 RRSP contribution limit is 18% of 2021 earnings, up to a maximum of $29,210.

2023 RRSP/TFSA limits

  • The 2023 RRSP contribution limit is 18% of 2022 earnings, up to a maximum of $30,780.
  • The Canada Revenue Agency has increased the 2023 TFSA contribution limit by $500 to $6,500.


If you need help, reach us at, through our support desk, or call us toll-free at 1-855-683-2030.

Myth vs. Fact: Financial wellness at work

Myth vs. Fact: Financial wellness at work

While more and more not-for-profit organizations are recognizing the need for workplace financial wellness programs, a group retirement plan may not be at the top of the list for some HR leaders. But a new HOOPP report finds that retirement benefits are what many employees are seeking, as they face increased financial stress and anxiety during these uncertain times.

We break down the myths about retirement and show how a good group plan can help you meet your HR goals.



Now is the time to provide a group retirement plan

Colleagues on whiteboard

Inertia is a common foe encountered by individuals when planning for retirement. Whether due to discomfort around the topic, other financial needs taking priority, or a feeling that retirement is simply too far off to think about now, it’s easy to fall into the trap of delaying.

Employers can face similar barriers when it comes to introducing retirement benefits for their teams. Budget constraints, perceived staff needs, and other strategic priorities can leave leaders in a constant state of “We’ll look at this in six months.” However, the pandemic has left many employees feeling less financially secure and more in need of lasting solutions to help them thrive. HR leaders have an opportunity to act now to support their team members in overcoming a challenge that most people struggle to face alone.

The pandemic has exacerbated financial stress among your employees

Personal finance is one of the most common sources of stress in the best of times, and recent events have only made matters worse. In fact, 59% of Canadians are worried about the effect of the pandemic on their savings and retirement plans, according to a recent Ipsos survey. This same figure was 73% among gen-Zers, challenging the popular notion that young people are not concerned with their financial future.

How can employers best respond to this issue and effectively support their staff?

Retirement might be the most valuable benefit

As organizations grow and build out their total compensation strategy, HR leaders often wonder how to provide the most value to their team while working within a certain budget envelope. In many cases, there is a strong business case for retirement benefits being a priority addition to a total compensation package. Given the value of a good workplace plan compared to a typical individual approach and the compounding effect on financial health that retirement benefits offer to staff members over their lifetime, starting early has an outsized impact.

It’s also easier and more affordable than many people think. Advances in technology and innovation in the design and administration of group plans have made them more accessible than ever for organizations of all sizes to offer high-value retirement benefits to staff. It’s also a great way for smaller employers to stand out from the competition when it comes to recruitment and retention, particularly when financial security is top of mind for workers and job-seekers coming out of the pandemic.

There’s no time like the present

Time is a hugely valuable resource when saving for retirement. Employers can help their teams take full advantage by providing a high-value workplace plan and offering a matching contribution to get people saving.

If you’re interested in exploring what this might look like for your team, we would love to speak with you. You can schedule a free consultation with one of our employer solutions specialists.

Protecting your employees’ interests

Company team celebrating

Employers who set up group retirement plans are looking to do the right thing for their employees’ financial future. One way to protect your employees is by choosing a provider that is prepared to adhere to a higher legal standard called a fiduciary duty. This standard means the provider is obligated to put the interests of plan members first. Providers of Registered Pension Plans are required, by legislation, to adhere to this standard. For Group RRSPs and Group TFSAs, however, the standard is optional, as no such legislation yet exists, despite advocacy by regulators and consumer financial protection advocates. It is up to your provider whether they incorporate this standard into the agreement they will sign with you.

Common Wealth Retirement, who is the plan provider for Common Good, believes that employers who offer Group RRSPs and Group TFSAs deserve the same protection for their employees as larger employers who offer pension plans. That is why a “best interests” standard is built into the contracts with employers, giving you and your employees the comfort that the Common Good Plan will put their interests first. Other providers’ standards vary. Be sure to ask about this as part of the buying and contracting process with whatever provider you choose.

Find out more about navigating the market for group retirement plans by downloading our free guide to choosing a group retirement plan.   

How do we encourage our employees to participate?

retirement plan employee participation

Establishing a healthy saving routine is arguably the most important step your employees can take towards becoming retirement-ready. 

There are a few ways to encourage participation in your plan: 

  • Make it a condition of employment. If you build participation in your plan into employee contracts, it will become mandatory for them to join.


  • Provide a match. If your plan is voluntary for employees, you can encourage them to join by matching their contributions up to a certain amount. This can also encourage them to save more.


  • Automatic escalation. With automatic escalation, members agree in advance to having their savings automatically increase over time. This technique is gradually being introduced to retirement plans around the world and has had a big impact on both employee savings and satisfaction. Not all providers offer automatic escalation, and those that do implement it in different ways. The Common Good Plan provides a personalized automatic escalation schedule to help employees “catch up” to an optimal saving level and keep pace with wage and price inflation once they reach that level.


  • Provide education. Retirement can be an intimidating topic. Many employees want to learn about a retirement plan before joining. You and/or your provider can offer education to help with this process. This can include self-serve resources, more interactive sessions in the workplace, or webinars to introduce the plan to employees, help them get the most out of it, and educate them on the basics of saving and planning for retirement.

Need help in choosing a group retirement plan for your organization? Download our guide for HR leaders

Three questions to ask when evaluating your current group retirement plan

retirement plan
  1. Is it actually a retirement plan (or just an investment account)?  

Many group “retirement” plans are not really retirement plans. They are basically investment accounts, where employees can choose from a (too often large) number of funds, and are left on their own to figure out the key aspects of retirement planning on their own.  

Here are some questions you can ask to understand if your plan will actually help set your employees up for retirement success.  

  • Does it help them figure out how much to save? 
  • Does it help them figure out how much income they will need in retirement?  
  • Does it help them turn their savings into retirement income? 
  • Does it help them understand and make decisions about government benefits, such as Canada Pension Plan, Old Age Security, and the Guaranteed Income Supplement? 

Offering a retirement plan, rather than just an investment account, can be much more beneficial to employers. After all, it is retirement saving and planning (rather than just investing) that is a key source of financial stress for so many Canadians.  

2. Are you paying too much in fees? 

Canadians pay some of the highest fees for investments in the world. And while the fees for group plans can be lower than what you might pay through a bank, they can still be high, especially for smaller and medium-sized employers. Insurance companies and banks often charge members fees of 1.5% to 2% of assets. This can cost your employees hundreds of thousands of dollars over a lifetime.  

You can see what your employees are paying by reviewing the statements and documents you receive from your provider. The fees are often referred to as a Management Expense Ratio or MER, and they usually vary by the type of investment fund members are invested in. You can use one of the fee calculators out there (see this and this) to see what this is costing your employees.   

3. Are you making the most of the Tax-Free Savings Account?  

Most group retirement plans are based around the RRSP. In fact, “Group RRSP” has become synonymous with group retirement plan in much of the industry and in many employer circles. This neglects the power of the Tax-Free Savings Account (TFSA). TFSAs are usually a better retirement savings vehicle for modest-income earners (e.g., those earning less than $50k per year), are a powerful supplementary retirement savings tool for upper-income earners, and are popular with those younger employees whom employers sometimes struggle to engage in workplace retirement programs.  

Consider adding a TFSA to your group retirement plan. In doing so, think not just about whether your current provider offers a TFSA, but whether it is truly integrated into the plan. Some providers do not offer a Group TFSA option at all. Others say they offer one, but when you scratch below the surface, they do not offer payroll deduction for TFSA contributions.   

To learn more about how the Common Good Plan combines easy retirement planning, low fees, and tax and government benefits optimization (including integrating both a Group RRSP and Group TFSA), and how it might work for your workplace, book a free consultation with a member of our team. 

Find out more about navigating the market for group retirement plans by downloading our free guide to choosing a group retirement plan.   

How much should I contribute as an employer?

This is one of the most common questions employers ask. There are a few different ways to answer it.

  • How much can you afford? This is a question for you and your finance team to work out. One way to increase your contribution within budget is to take some of your initial retirement plan contribution from the salary pool. Recent surveys have shown that a majority of Canadians would accept a lower salary in exchange for a good workplace retirement plan.1

  • How much is enough for employees to retire? While this depends on a variety of factors, most Canadians need to save somewhere between 10-20% of their pay to be able to maintain their standard of living in retirement – assuming they are saving in a good plan. If your team’s average earnings are close to the Canadian average (a little over $50,000), then an employer match of 5% would give most of them a good chance of being retirement-ready, assuming that they save this amount consistently throughout their career. As provider of the Common Good Plan, Common Wealth Retirement provides each of your employees with personalized guidance about how much to save to achieve their retirement goals.

  • How much are peers/competitors contributing? Sun Life reports that among the minority of employers with under 100 employees that offer a plan, the average member contribution is $3,535 per year and the average sponsor contribution is $3,065 per year.2 However, the amount can vary widely by industry and sector, so it can be useful to check with peers to see what they are doing.

You can learn more about choosing a group retirement plan by downloading our guide for HR leaders.


1 Healthcare of Ontario Pension Plan, “Research finds Canadians choose greater retirement security over more pay” (September 29, 2020).
2 Sun Life, “Designed for Savings 2019: The benchmark report on capital accumulation plans in Canada” (2019). These figures are based on Sun Life provided plans only.