Every HR team has specific employee management goals. Maybe you want to cut employment costs, stop spending so much time on recruitment, or find a way to boost employee engagement. For any of these goals (and many more), employee retention is an excellent solution. Let’s explore exactly how.
Businesses can benefit in a wide variety of ways when they focus on employee retention. These include:
- Reduced Turnover Hassle
- Improved Morale
- Reduced Acquisition and Training Time
- Dedicated Company Experts
- Increased Overall Productivity
- Better Customer Experience
- Reduced Costs
If you’re already convinced of the importance of employee retention, we’ve also provided some of the top strategies.
1 – Employee Retention Reduces Turnover Hassle
Employee turnover is a natural aspect of any business, but high turnover can be a hassle for any HR team. Every employee that leaves takes a significant chunk of your time to process, not to mention the time you spend searching for their replacement - waiting for resumes, screening applicants, conducting interviews, and more than likely repeating that process.
While each of these aspects is essential to replace the lost employee, there is an easier way. Focusing on employee retention – up front – can help reduce the hassle and wasted time all around.
What level of staff turnover is your HR team tackling? How does it compare to the industry average? Check out the table below:
|Turnover Rate By Industry|
|Industry||Turnover Rate – 2018|
|Mining and Logging||55.5%|
|Trade, Transportation, and Utilities||49.0%|
|Transportation, Warehousing and Utilities||44.2%|
|Finance and Insurance||25.4|
|Real Estate, Rental, and Leasing||35.3%|
|Professional and Business Services||63.3%|
|Education and Health Services||32.5%|
|Healthcare and Social Assistance||33.0%|
|Leisure and Hospitality||76.7%|
|Arts, Entertainment, and Recreation||87.4%|
|Accommodation and Food Services||74.9%|
Low employee retention not only hurts your workplace environment but is also expensive. On average, losing an entry-level employee can cost 50% of their salary.
Consistent staff changes make it hard to develop the type of long-lasting friendships that can make a job that much more pleasant. In fact, employee happiness is 23.3% more correlated to connections with coworkers than direct supervisors.
However, focusing on employee retention means building a team of dedicated, confident employees. Employees who stay at a company for longer often:
- Become more comfortable and less stressed.
- Develop better working relationships with their co-workers.
- Enjoy seeing more long-term success and pay-off for their hard work.
- Have a stronger sense of belonging and community.
- Contribute more to company culture and building the business.
In addition to the direct effects of a more veteran workforce, each of your retention efforts shows your employees that they are valued. After all, 79% of employees who do not feel valued look for other job opportunities.
#3 – Employee Retention Reduces Acquisition and Training Time
Anyone in human resources knows turnover eats tons of time. First, it takes time to find new employees who are qualified and reliable. Then, it takes time to set up interview rounds and negotiations. After that, it takes even more time to onboard employees. Finally, you have to actually train new employees. Adding up all the hours, turnover is a human resource headache.
By focusing on retaining employees, you can cut down on the time spent on those tedious new-hire tasks and get back to the fun stuff (like planning parties!).
It’s important to note that employee retention can also help you acquire new employees. As we just discussed, low staff turnover boosts morale. Happy employees are an incredibly effective recruitment and training tool. In fact, referrals are the #1 source of new-hire volume and quality.
Employees who are happy with their long-term work situation will be more likely to recruit from among their own network and put forward candidates, advocate for the business when attracting talent, be more enthusiastic and helpful during training, and help new employees assimilate more quickly into the company culture. You've seen it happen. Imagine if that happened all the time.
#5 – Employee Retention Increases Overall Productivity
A constant turnover of employees comes with a slew of problems, but the most immediately bad for the workforce is the blow to productivity. Naturally, there are understaffing issues: positions going unfilled potentially mean delays, overtime, and more frequent or problematic mistakes.
Additionally, someone in a new job needs to form good working relationships and develop solid communication avenues with their co-workers – that social connection greases the wheels of collaboration and increases productivity all around. Time wasted on the results of miscommunication can stack up rapidly if the mistakes or misunderstandings are large enough.
In fact, all together, it can take 1-2 years for a new employee to reach the level of productivity of the employee they replaced. Sure, some turnover is inevitable, but even a small increase in employees who stay saves the business a lot of lost productivity - for both employees and the HR teams that have to deal with these transitions.
#6 – Employee Retention Spreads the Love to Your Customers
By this point, we know that focusing on employee retention makes employees happy. Happy and engaged employees pass those feelings on to their customers. They provide better service, anticipate problems, and go the extra mile to make sure the company has a good reputation.
Employee engagement pays off. In fact, a recent report found that employees who are engaged are more likely to improve customer relationships, resulting in a 21% increase in productivity over less engaged employees.
Beyond basic employee engagement, staff members who have been around longer will more likely be able to solve complex or unique problems more quickly and confidently, which saves time, reduces work for others, and prevents lost business from unhappy customers.
#7 – Staff Turnover is Expensive – Employee Retention Saves You Money
Turnover is expensive. Everyone involved in hiring and training knows how quickly the hours can rack up - particularly if the position goes unfilled for a while. Employees constantly moving in and out mean potentially significant costs associated with:
- Severance or other exit packages.
- Recruitment and talent acquisition.
- Hours spent on resume analysis and interviews.
- Hours spent on onboarding and training.
- Lost productivity.
- More frequent (and costly) mistakes.
- Lost revenue as a result of a downgraded customer experience.
Depending on the role you are replacing, turnover costs can range from uncomfortably high to truly shocking. For a low-paying (traditionally high-turnover) job, it costs about 16% of the employee’s annual salary. This jumps to 20% for mid-range positions, and skyrockets to over 213% for high-level executives.
High turnover is particularly destructive because businesses end up paying these costs time and time again – sometimes even multiple times a year. Employee retention can drastically reduce these expenses.
Top Strategies for Boosting Employee Retention
Anyone in HR knows employee retention has seriously solid benefits, and if you didn't, by now we’ve certainly established the tangible financial and organizational rewards. Now, we’ll go over strategies you and your HR team can use to actually boost employee retention.
Even if it isn’t the most important benefit, a lack of career development is the top reason that employees gave for leaving their jobs. Millennials overwhelmingly consider career development opportunities to be one of the most important elements of a company. However, only half of employeesin a recent study said their employers provide career development opportunities that meet their needs and chances for advancement.
A job without career development is the classic “dead-end” job – and few things are less appealing for a long-term career prospect. People have a natural desire to grow and move forward, and making opportunities for them to do that by developing their careers is a fantastic way to boost retention.
It isn’t a surprise that healthcare is the most important employee benefit. After all, it isn’t uncommon for someone to leave a career they love simply to have a job with good health benefits. An attractive healthcare plan is an ideal strategy for recruiting and retaining high-value employees.
However, offering improved health benefits is also relatively expensive. With premiums expected to rise 6% for employers over 2020, many businesses are already contending with a stretched healthcare budget.
HR team members have a lot of power to do good in this instance. If you love the thought of improving health benefits, but just don’t have the budget, consider implementing health initiatives. Incentivize employees to adopt healthier lifestyles or achieve fitness goals. This tactic can help cut down on healthcare costs simply by improving employees’ health.
Knowing there’s a raise on the horizon is a powerful incentive to remain at a company. Regular evaluations and raises ensure that there’s always something for employees to look forward to – rather than encouraging them to look elsewhere.
Naturally, raising salaries is not an inexpensive strategy. Surprisingly, it isn’t an incredibly effective long-term strategy either. A study from the University of Toronto reports that a 10% pay raise made employees only somewhat less likely to quit.
Part of the reason may be that the positive feelings associated with a raise don’t last very long. The study found that the happiness and satisfaction generated by the thrill of a raise lasted more than a week, but still less than a month.
One possibility that's interesting to consider is that regular evaluations and raises may be seen as more of a plus when they're part of a proactive and robust employee retention strategy.
401(k) Retirement Plan
Retirement. Second only to healthcare in importance to employees, a retirement plan is hands-down one of the best ways to incentivize employee retention.
A MetLife study found that retirement benefits were a key to earning employee loyalty. In fact, four in 10 employees said retiree benefits are a strong reason to stay with their company.
However, there is a major caveat to 401(k) retirement plans – they have to be well-run. A healthy 401(k) optimized for employee retention has high participation rates, an emphasis on accessibility, a clear and scheduled onboarding process, and access to personalized financial advisory services. And all that comes down to HR.
Thankfully, boosting employee retention with improvements in a 401(k) plan is one of the few strategies that isn’t prohibitively expensive, or time-consuming. In fact, an optimized 401(k) can actually save money for everyone involved, and be a lot easier to manage than you might have thought.
Wellness and Work-life Balance
If there’s anyone who understands how important it is to maintain comprehensive employee wellness, it’s HR. This strategy covers a broad range of potential employee benefits and tactics - like leave benefits, flexible working benefits, wellness benefits, and family benefits. Wellness and a good work-life balance are about providing your employees with the tools they need to be happy in their job (and thus much more likely to stay).
These types of initiatives can include:
- Generous leave options
- Options for remote work if possible
- Flexible working hours
- Parental leave or daycare options/incentives
- Health and fitness goal initiatives
Wellness and work-life balance initiatives help your employees live full and satisfying lives beyond their employment.
What? More interviews? Just when we were solving the turnover crisis? Don’t worry, these are different.
Stay interviews are one of the most direct and hands-on forms of employee retention in this list of strategies. Want to know what you can do to make sure you are focusing on retaining your employees? Just ask. In essence, a stay interview is a conversation between employee and manager about what makes the employee keep working for you.
Some stay-interview questions you can ask include:
- What makes you look forward to work?
- What do you like the most about working here? What do you like the least?
- What keeps you working here?
- What would tempt you to leave?
- How do you like to be recognized for good work?
- What can we do to make your job more satisfying?
- What advice about your job do you have for managers?
Though these meetings can be a significant investment of time, they’re also an investment in employees, and their long-term happiness. Employees will take note. HR isn’t just there to listen to complaints and put out personnel fires. People feel valued when there is actually proactive listening. Just the act of acknowledging their opinions can make employees feel important and help increase retention.
Related to both 401(k)s and work-life balance initiatives, financial wellness is a service that provides employees with knowledge and guidance about their unique financial wellbeing.
Naturally, one of the most common reasons for leaving a job is to obtain one with better pay. This can be mitigated by offering financial wellness and advisory services – helping the employee maximize their paycheck, plan for the future, and make complex financial decisions.
If an employee feels comfortable and confident with their financial situation, they’re more likely to stay with the company providing them with the resources to remain that way. A study by MetLife discovered that 53% of employees would be more loyal to their current employer if they were to offer financial planning, and 51% would be more likely to accept a job with a new company for that service.
As the focal point of employee financial decisions, HR has the power to make a major difference in how employees view and utilize their compensation. Use that power for good.
Transparency and communication aren’t an official benefit plan you can implement, but they are values that HR can champion within your company culture.
Open-door policies, company-wide chat, and other coordination incentives and events can help make sure that employees are heard – by HR, by management, and by one another.
When employees feel heard, they’re more likely to voice opinions and share insights that might not otherwise have been known. They also feel more comfortable voicing concerns, admitting to gaps in knowledge, and asking for guidance – all of which helps prevent mistakes and boost productivity.
Frustration with communication breakdowns or a lack of being able to contribute will drive employees to seek a job elsewhere. Focus on retention by shifting how you communicate in the office to a more functional and social model.
Are you anxious about employees leaving? Spending too much time dealing with hiring and firing? Getting the feeling company culture is totally lackluster? Employee retention can turn that around. If there’s one fact we want to underline, it’s that the advantages of retention and the disadvantages of staff turnover are too huge to be ignored. We’ve summarized the most compelling aspects (one last time) below:
Regardless of your industry, employee retention should be priority number one for HR. A business can’t expand overnight, conjure up a new customer base out of thin air, or rid itself of competition – but you and your HR team can mitigate all of those on a smaller scale (and help the business enormously in other ways) with increased employee retention.
How much would your business benefit from increased employee retention?