First published on Thursday, June 4, 2020
Last updated on Tuesday, December 17, 2024
Employees leaving your company is unavoidable. But every time someone leaves, it costs you both time and money.
You must understand how important employee retention is to your company. The last thing you want and need is to spend more money hiring and training new staff regularly.
In this guide, we’ll explain what employee retention is, the effects it can have, and how to improve it in your company.
What is employee retention?
Employee retention is when a business keeps its most productive and high-performing staff by creating a workplace culture that promotes engagement and appreciation of its employees.
As an employer, you should strive to keep your best employees at your company. So, you need to understand the importance of it.
Why is employee retention important?
Employee retention is extremely important to the modern workplace. Having high employee retention should be one of your main priorities moving forwards. All employers should seek to keep their best staff.
So let's discuss the benefits and negatives of doing so.
What are the benefits of retaining employees?
There are many benefits to retaining employees and keeping your existing staff, understanding them will help you to realise their importance. The benefits are:
Increases company efficiency
The longer employees have been with your business, the quicker and easier they'll find processes and procedures. Meaning your company will become more efficient with its output.
Improves productivity
More experienced employees are often highly-skilled and can carry out tasks quicker. Thus, improving company productivity.
Higher employee morale
Employees who feel they belong in a company are often happier and have an increased morale. In the same breath, if employees witness a high amount of people leaving, their morale may decrease.
Lower hiring and staffing costs
Having to hire and train new staff regularly can incur high costs for your company. Retaining your staff is the best way to keep these extra business costs down and avoid this pain point.
What happens when you can't retain employees?
There are many negatives that come when your best employees leave. So, you must familiarise yourself with them so you can fully understand the importance of employee retention in your business.
For example:
Decrease in employee morale and productivity
More employees leaving can lead to lower morale and productivity among your employees.
Difficult for relationships to form
Working relationships form over a long period of time, so to build chemistry and cohesion you should want your employees to stay with your company for a while.
Extra hiring and training costs
Hiring a new employee comes with a range of extra costs. Such as advertisement, paying a recruitment agency, background checks, and training.
To fully understand why keeping your best employees is so important, you need to understand the cause of high employee turnover. Employee turnover is the measurement of the number of employees that leave a company over a period of time.
As an employer, you need to understand the causes of employee turnover and if there is anything you can do to lower the rate.
What causes employees to leave your business?
Employees will always leave their jobs, and this isn't always the fault of the employer. However, sometimes it's down to the business owner to do more to keep their best staff.
So, let's go over the many things that can cause high employee turnover:
Poor compensation or employees not feeling like they're paid enough
Lack of employee benefits
Lack of flexible working or work-from-home opportunities
Lack of career development opportunities and overall career progression
Low job satisfaction
Better job opportunities elsewhere
Poor work-life balance
Lack of financial stability within the company
Lack of recognition
Costs of high employee turnover
There are many associated costs that come with high employee turnover, so you must be aware of them. These include hiring, recruitment, the time it takes to train new employees, and the time it takes for new starters to get to grips with how the company works. As well as covering the post until a replacement is found.
Retaining employees is the best way to lower these costs, so you need to know how to decrease them in your company. Taking steps to reduce it will reduce your turnover costs.
To be able to manage your employee turnover successfully, you need to be able to measure the rate your employees are leaving your company. See our article on calculating staff turnover rates for more information on how to measure the rate your employees are leaving.
How do you measure employee retention?
All employers seek low employee retention, that’s why it’s important to measure it. This is done via a stability index.
The typical calculation for the stability index is:
The number of staff with service of more than one year or more, multiplied by 100, divided by the number of staff in post one year ago.
For example, 20 staff members with more than one years service x 100 = 2000 ÷ 25 staff members in post one year ago = 80. This would mean a staff retention rate of 80% for that year.
How to Increase Employee Retention
To help increase employee retention you need to have a successful employee retention strategy, especially if you're competing in a tight job market.
There are many effective employee retention strategies you can use in improving retention, so let's discuss them in more detail:
Provide a competitive salary
One of the most common reasons why employees leave to find a new job is they feel underpaid. So make sure you always offer a competitive compensation and salary package to keep your top talent.
Make sure you compare salaries, packages and benefits for similar job titles throughout your industry. Offering the right salary is key to keeping down your turnover rates.
Improve your Workplace Culture
Company culture is vital to employee happiness and retention. You should try to make your employee's experience at work as positive as possible, and creating a positive culture is a fantastic way of doing so.
Creating an inclusive, diverse and equal workplace culture will increase employee happiness meaning staff will want to stay with your company. Failure to do so can lead to your good employees seeking new employment elsewhere.
Improve your onboarding process
Your onboarding process is a vital part of your overall recruitment process. Ensure you make the new hire fully aware of how the business runs daily during the hiring process.
Don't over promise just to get people to join your company. When it comes to being a successful employer, honesty is the best policy.
Conduct employee surveys
Employee satisfaction surveys can be a vital way to help you fully understand how happy your employees are with their working situation.
Carrying out confidential attitude surveys is a good way to improve your company and the working lives of your employees. Making small improvements to how your business is run can improve your employee retention rate.
However, you shouldn't act angrily with the results. These surveys should be seen as a positive and a way to improve your employee's happiness.
You can even choose to send surveys to former employees six months after they leave. But, don't be alarmed if they don't respond!
Conduct exit interviews
Along with conducting an employee survey, exit interviews are a fantastic way to improve your company.
It's always advisable to hold exit interviews. They are a vital tool in finding out the reasons why someone is choosing to leave your company. Discussing their reasons can open your eyes to what's going wrong at your business and ways to improve things in the future.
Remember, don't act the wrong way when holding the interview. You don't want to get into a conflict with the leaving employee simply because they're leaving your company.
Increase your employee engagement
Focus on increasing your employee engagement. This can be done by simply showing your face around the business and taking an interest in your employees.
Engaged employees can give your company an advantage over your competition, due to an increase in productivity and lower employee turnover.
You don't want to lose your best employees over something that can be so easily rectified.
Encourage employees to find a healthy work-life balance
A good work-life balance is extremely important to employee retention. If your employees are struggling to balance both work and personal life demands, this may lead to increased job satisfaction.
Encourage them to take their annual leave, take a holiday, relax, and forget about work for a few days. This will lead to them returning to the company with a refreshed and happy mindset.
Focus on your employee wellbeing
You should always support employees in their mental and physical wellbeing as one of your top priorities. In the modern world, there are increased stresses which may lead to your employees suffering from mental and physical health issues.
There are many things you can do to improve your employee wellbeing, such as simply having a conversation or implementing an employee assistance program.
Make your employees aware of the support network around them, and remember - there's more to their life than working for you.
Invest in your employee's professional development
You should always offer training and development opportunities to your employees. Doing so will not only increase their confidence in you but improve their skill set moving forwards.
You should provide annual refresher training for your employees. This is especially important following a risk assessment being carried out.
Helping employees to improve their skills will increase their output, and hopefully your profits too.
Reward your Employees
You should provide feedback, reviews, and rewards to your employees. If applicable, you should introduce a bonus scheme for employees or implement an employee recognition platform. Providing rewards will almost certainly improve employee morale and productivity, you should always value your workers.
Higher-valued workers are more likely to stay in a company for a longer period of time.
Start mentorship programs
As an employer, you should think about introducing mentorship programs. You should partner up new employees with more experienced employees.
This is a great way to build a working relationship and to bounce fresh ideas around between employees, especially if they are from different backgrounds.
Offer flexible working
In the modern business world, offering flexible working options to your employees is a must. There are many forms of flexible working that you can offer your employees, such as remote work, work from home, and flexi-time.
Offering forms of flexible working will help to improve your employee's work-life balance and job satisfaction and will mean they'll stay at your company for longer.
Get advice on employee retention with BrightHR
Employees leaving your company is unavoidable, and sometimes not your fault. But every time someone leaves, it costs you both time and money to hire a new starter.
You must understand how important employee retention is to your company. The last thing you want and need is to spend more money hiring and training new staff regularly.
If you need any advice when employees resign, we are on hand to help with our 24/7 HR and employment law advice line.
