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Employee retention is the organization’s key to increasing growth, retaining top talent, & cutting hiring costs. Improve yours
As of 2021, the average employee turnover rate for professional services was 14 percent - the highest in 8 years. Also, in 2022, a WTW survey found that 44% of employees were actively searching for new roles at the end of 2021. These stats buttress the fact that the Great Resignation wasn’t restricted to the COVID-19 crisis period. In short, retaining employees just got much harder than hiring them.
And what’s the problem with that, you might ask?
Well, employee retention offers companies several advantages over their non-retention-focused counterparts, including improving productivity and cutting turnover costs. But that's not all. Retaining employees also assures that your best talent won't work for your competitors.
These are a few reasons why organizations need to implement intuitive employee retention strategies to improve their retention rates. In this article, we will look at the benefits of employee retention and what companies can do to improve their employee retention plan.
Employee retention describes a company’s ability to prevent/manage the number of people who leave the company, voluntarily or involuntarily. It is how well and how long an organization can keep their employees within the fold.
Gartner provides a more worker-centric employee retention definition. It describes the term as, “... organizational policies and practices that are designed to encourage employees to remain employed by the company.”
When you have lots of employees leaving your company, it means you have a high turnover rate and a low employee retention rate. A high turnover rate can signify that employee satisfaction and engagement are not yet a priority in your workplace, while a high employee retention rate indicates the opposite.
Employee retention in business is often expressed in percentages. A company with an 80 percent annual employee retention rate is better than one with a 40 percent employee retention rate.
Don’t get us wrong, we aren’t saying that people should never leave your company. Of course, it’s inevitable to have turnover, however, it shouldn’t be more than the current average rate of 10.6 percent.
Besides, long-term employees are often a firm's greatest asset, and their knowledge — gained from years of work — is vital to the growth of the business.
Knowing your employee retention rate is the first step to creating retention strategies. To calculate employee retention, simply divide the entire number of employees you have left over from a certain period by the total number of employees you originally started with during that same period, then multiply the result by 100.
For instance, if you started with 90 employees in a year, and now you have 80 left.
Your retention rate would be:
(80 / 90) x 100 = 88.88 percent.
Now we know how to calculate our employee retention rate, let’s find out why it’s so important to keep an eye on employee retention.
We’ll use numbers.
That's how much money US firms lose each year due to voluntary turnover. It's so easy to see quitting employees as 'people who left' and ignore the cost associated with them leaving. After all, they aren't leaving with your money.
But they are.
Gallup estimates that the expense of replacing a single employee might be anything between half and double that person's yearly compensation. So, losing 20 employees with an annual salary of $40,000 could set you back $400,00 to $1.6 million!
This is a major reason why we shouldn’t neglect our strategies for employee retention. But retaining employees does more than save you costs on replacements. There are other business benefits to employee retention, and we’ll explain them below.
Believe it or not, employee retention affects the way you provide services to your customers. Experienced employees are usually better at handling customer enquiries than new hires since they've probably dealt with these issues before and have honed their problem-solving skills over time.
Also, your veteran employees might be the reason why your customers keep coming back. Most may have developed their relationships with your customers, and likely know the uniqueness of their challenges.
It takes time for new personnel to properly commit to the business. Even with a robust onboarding process, new hires might feel out of place for a while, before finding their purpose in the company. Long-term employees are more likely to be engaged and devoted to the organization.
Employee engagement focuses on motivating employees to approach their work with zeal, commitment, and the desire to recommend your business to others. Experienced employees who are more familiar with the company’s history and ideals are better able to do all the above than newly hired employees.
Constant employee churn can demoralize your remaining employees. It’s not easy watching everyone you’ve bonded with, leave. It’s harder still to watch them replaced by new hires you have to get used to too. You might decide to leave too!
Increased staff retention improves employee morale and boosts team cohesion. It’s not easy to get your team to that point where they’re a well-oiled machine. However, focusing on employee retention can help you achieve this faster.
A new hire can disrupt your company's productivity. Not only do you spend valuable time training them for a role, but they may also still require some time to adjust and may often need the guidance of veteran employees. This may result in older employees abandoning their tasks to help the newbie, causing stress and employee dissatisfaction.
We’re back on the money side of things.
Take into account all of the expenses associated with recruiting new personnel, including those related to hiring, onboarding, and training. Look how much it is to advertise on job boards and boost job ads on LinkedIn!
According to research by the Society for Human Resource Management (SHRM), it takes 42 days on average — six weeks — to fill an average post. Imagine the ad costs for that period.
Retaining staff lowers or eliminates these expenses. Instead of wasting money on recruitment, you can use your funds to help your seasoned employees upskill and develop themselves within your company.
Besides saving you a ton of money in recruitment costs, employee retention also makes you eligible for certain government-issued perks like The Employee Retention Credit under the CARES Act.
This scheme was established to encourage businesses to keep employees on their payroll during the COVID-19 crisis. It provided a refundable tax credit equal to 50% of up to $10,000 in wages paid by eligible employers whose business had been financially impacted by COVID-19. Business owners could ask for this refund for wages paid between March 13, 2020, and the end of the year.
When the Infrastructure Investment and Jobs Act was signed into law in November of 2021, the wage period was extended to September 30, 2021. Although the scheme has ended, businesses that meet the requirements can retroactively apply for stimulus funds based on their financial data from March 13, 2020, through September 30, 2021.
Higher employee retention rates equal more experienced employees. Important information and abilities can be lost permanently if experienced people leave without adequately handing over their expertise to others.
And to cap it all, employee turnover benefits your competitors. When your staff leave, they transfer all the knowledge you’ve given them, along with their own acquired skills, to your rival.
Reducing staff turnover while maintaining overarching corporate objectives are two ways to improve employee retention. Typically, it starts with selecting the right staff and continues with providing an ideal work environment that supports said, staff.
SHRM's Employee Job Satisfaction and Engagement research report has identified these five factors as the leading contributors to employee job satisfaction:
Also, recent HubSpot Data has found that the reasons for high employee turnover were a lack of work-life balance, lack of flexible schedule, or lack of career growth opportunities.
Putting all this into perspective, we can safely agree that your retention strategy should feature the following employee retention ideas below.
Your employee retention strategy starts with hiring the best candidates that are not only knowledgeable but also fit your company culture. You don't want to rush into recruitment, and neither do you want a long recruitment process that dissuades candidates.
Additionally, be sure to focus beyond the technical requirements of the job, and try your best to understand who you're interviewing. Be sure to define your expectations and work culture, to minimize misalignments in skills and duties.
Providing extensive employee support is key to retaining employees. When your employees feel that they can comfortably thrive in our company, they’re encouraged to commit more time and effort to their work. They are encouraged to stay.
Some of the best ways to help your employees flourish include providing adequate and continuous training, practicing effective and clear communication, and On-the-job training and continuous development are crucial to employee retention.
Employees want to know if you're invested in their future too. Therefore, you should carry employee growth alongside the company when planning for the future. You should prioritize internal hires and promotions when possible and provide opportunities for coaching and mentorship.
There’s a strong correlation between increased employee engagement and retention. Employees who know how they fit in the company and are familiar with the brand mission are more likely to be your brand’s biggest ambassadors.
However, when left to their own devices and with no specific direction, employees may find themselves slowly losing that spark and may look for it elsewhere.
According to Quantum Workplace’s 2020 Survey, disengaged employees were 3.3 times more likely to leave their company within 90 days of the survey compared with highly engaged employees.
To avoid this mass exodus and motivate disengaged employees, employers should emphasize giving and receiving feedback, foster a sense of community, and ensure there's trust between the employees and management. If your team is clear on what their role is, what your company stands for, and the opportunities for growth, they'd want to stay longer.
Clear communication is crucial for employee retention. Vague feedback can lead to confused and disillusioned employees. For example, instead of asking an employee to “just improve,” give them specific areas to touch and show them how to go about it.
Additionally, workers like to be respected and recognized for their accomplishments. If they do well, tell them. And here are a few ways you can do that:
Employees are less likely to leave when adequately compensated. Statistics also indicate that companies with fair compensation have a 56% lower attrition rate than companies without. You should also offer benefits, promotions, and perks like hybrid or work-from-home opportunities.
Higher employee retention rates ensure that the best talent stays right where they're meant to be — with you. A comprehensive employee retention plan is your key to achieving this goal. With Assembly’s suite of collaborative tools, you can augment your employee retention strategy and support your employees without breaking a sweat. Contact us to discuss how we can help boost your employee retention rate today.
Discover how to create the kind of content that will have your employees logging in to your intranet everyday.