Employees are key to the success of any company. So, there's nothing wrong with them choosing to find new employment.
Employee retention is your ability to ensure the best staff stay in your business for longer. Using effective retention strategies can increase employee morale, and overall job satisfaction. Failure to do so can mean you lose your highly skilled and best staff.
In this guide we'll explain what the employee retention definition is, why it's important, and ways to increase it in your business.
What is employee retention?
Employee retention refers to how well a company can prevent its staff from leaving. It plays a vital role in maintaining your business productivity and success.
Increasing retention in your company has a direct impact on the success of the performance of your business moving forwards.
Why does employee retention matter?
Retention is crucial to your business, you should be doing everything you can to keep your best employees.
Having a higher employee turnover can lead to negatives throughout your business, such as a decrease in employee morale. On the flip side, having higher employee retention can lead to a stronger workplace culture and happier staff.
What are the benefits of retaining employees?
There are a range of benefits that come with lower employee turnover/ As an employer, there are many more that you should become familiar with.
Let's discuss them in more detail:
Reduces running costs
The more staff you retain, the less you have to hire. Hiring new employees brings extra costs; these start from the initial recruitment to training them up for their role. Furthermore, employee morale and productivity can take a hit - which can also have an impact on your business’ output.
Increased employee productivity
Retaining employees can have a direct impact on employee productivity. The longer your employees are with your company, the more up to speed they'll be with processes. This means the rate of productivity will increase throughout your business.
Increased employee morale
One of the main benefits of employed retention is the increase in morale. The higher your retention is, the higher employee satisfaction and morale will be.
More experienced employees
The longer employees stay with your company, the stronger their working relationships with colleagues are. Experienced employees can also pass on their knowledge to any new starters you have to help with the onboarding process.
Increased customer experience
As well as having strong working relationships, keeping employees in your company can help their relationships with customers.
Happy and long-term employees will often be more experienced in dealing with customers and any difficult situations that may arise.
Stronger workplace culture
A strong company culture is vital to the success of a business. The more employees that stay with a company for longer, a strong culture will be formed.
However this culture isn't built overnight, it's developed over time. This means you'll have to keep employees working for you to ensure a strong workplace culture can be created.
How to measure employee retention
To fully manage retention within your company, it's important you measure it correctly. One way of doing this is by using an employee retention rate formula.
Firstly, you should decide the time period in which you want to measure your retention. This can be monthly, quarterly, or yearly. Typically, it's measured over a year.
Secondly, you need to find the number of employees at the start of the time period and the number of employees at the end. This doesn't include any new starters throughout that period.
To find the retention rate, you divide the number of employees at the end, by the amount at the start, and multiply by 100.
Below is an example (based on an annual measurement):
- 30 employees at the start of the year, and 28 employees at the end: 28 ÷3 0 = 0.933.
- 933 x 100 = 93.33%. Giving you a retention rate of 93.33%.
If your employee retention rate is low, meaning you have high employee turnover - it's important you understand the reasons why.
What causes high employee turnover?
Even your most valued employees can choose to leave your company for several reasons, and it's important to find out why.
One way to find out why people are leaving your company is to conduct an exit interview. These interviews allow a departing employee to explain the reasons behind their choice to find new employment.
It's important you know why employees leave your business so you can make improvements to stop it from happening. These can include, but are not limited to:
- More compelling job opportunities elsewhere.
- Not offering a competitive enough pay and benefits package.
- Lack of career development opportunities.
- Lack of work-life balance, or feeling overworked and stressed.
- No employee feedback from management.
- Poor workplace culture.
As an employer, you should become familiar with the impact high employee turnover can have on your business and your existing workforce.
What is the impact of high employee turnover?
If many employees decide to move on from your company, the impact can be huge. It's important to become familiar with how high turnover can affect your business. Such as:
- Recruitment costs: It costs the company to hire and find the right replacement for a departing employee.
- Training costs: New employees will require training and time to adapt to the business. This will cost both time and money, as well as affecting the productivity of other staff who have to train them.
- Morale and productivity: More people leaving your company can have a big impact on the remaining employees' morale and productivity. They may have to take on extra workloads whilst you find a replacement.
- More employees may leave: One employee leaving can have a knock-on effect on other employees, who may choose to move on themselves.
How can you improve employee retention?
There are different ways you can go about improving employee retention in your business. It can start with ensuring you hire the right people, and having the correct onboarding processes in place.
Another way to increase retention is to implement an employee retention strategy.
What is an employee retention strategy?
An employee retention strategy is a specific area of your business that you choose to target to grow job satisfaction and happiness.
Incorporating retention strategies into your business can be seen as a great way to motivate employees. This in turn will improve your ability to keep the best staff in your business.
Different types of employee retention strategies
There are many strategies you can bring in to help retain employees, and it's important you become familiar with them.
Successful employee retention programs can lead to a fantastic range of benefits, such as employee happiness, morale, and a strong workplace culture.
Below are employee retention examples:
Offering higher salary than your competitors
Offering competitive pay and salaries is one of the most crucial ways in keeping your top talent within your company.
If you're unsure how much compensation your employees should receive, then it's worth undertaking industry research. It's vital you pay your employees properly, failure to do so can lead to an increase of staff looking for new employment.
Create a strong onboarding process
A well-planned and strong onboarding process is a good way to increase employee retention. The onboarding process in your company should be more than just training on the job. It should show them the culture and how to thrive in it.
Remember, you want to show your business off in the best light when someone joins. By doing so, you can be assured that they’ll stay working with you for longer.
Introduce flexible working
Another way to boost employee retention is to introduce flexible working into your business. Flexible schedules allow your staff to manage both their work and personal lives, such as the school run for children.
Promote a healthy work-life balance
Another way of improving retention in your company is helping your employees with their work-life balance. It's important to realise your employees have lives outside of work.
Encourage them to take holidays and time away from the office to recharge and refresh. Time away can help employees come back with a more positive mindset.
Reward your employees
Another way of increasing employee retention is to reward your employees. One way of doing this is to implement employee recognition programs. This can include rewarding work on individual projects with non-monetary benefits - such as an extra day of annual leave.
Also, it's important you encourage employees when they're struggling. Sometimes you'll have staff whose performance has decreased for many reasons. Remember, small encouragement can go a long way.
Create an inclusive and positive workplace culture
Creating a workplace culture that's inclusive where all your employees feel comfortable is vital for retention.
Any employees that feel left out or lonely at work are more likely to find employment elsewhere. On the opposite side, staff that feel part of the business will hopefully stay in the company longer.
Focus on employee engagement
Building employee engagement in your business is a great way to retain employees. Make sure you give your employees a voice to raise both positives and negatives surrounding their working life. Acting on any concerns is another part of increasing employee job satisfaction.
Engaged employees will speak higher about your company, and in turn be happier to stay with you for longer.
Reduce employee burnout
Employee burnout is a big part of the modern workplace. High workloads and tight deadlines can cause your staff to feel burnout and stressed. This can lead to more people looking to leave your company.
One way to avoid this is to communicate with your employees regarding their workloads. You should ask them if there's anything they need to help manage their work effectively and avoid becoming burnt out.
Provide employee wellbeing benefits
Benefits play a vital role in employee happiness, and it's an area you shouldn't ignore. Providing strong employee benefits, especially ones that focus on employee wellbeing can go a long way.
Introducing exercise hours or well-being days can allow your staff to switch off from the stresses of work for a period of time. Employee assistance programs are also a great way of improving employee happiness and retention.
Promote career development opportunities
As an employer, you should aim to improve both your employees' personal and professional development. Doing so can lead to many benefits for your company such as improving their skills and your company's output.
You should work with each employee and create a professional development plan that can be worked towards over a period of time. This will help increase their confidence in you that you're happy to develop their careers further in your business.
Conduct employee surveys
Carrying out employee surveys is a fantastic way of improving employee retention. They can provide you with a good insight into the happiness of your employees and areas they think you can improve on.
A range of questions can be asked in the survey. Ranging from compensation, workplace culture and management styles.
It's important you don't react the wrong way to any answers in the survey. You should also ensure anonymity to each of the employees that fill it out.
Get expert advice on employee retention from Peninsula
As an employer, your employees are key to the success of your business. However, from time-to-time they'll choose to move on to new employment. This is sometimes due to reasons out of your control, but sometimes you could have done more to keep them.
Employee retention is your ability to keep staff in your company. By using effective employee retention strategies, you can do all you can to ensure your best staff stay with you. Failure to do so can mean you lose your highest-skilled employees.
Peninsula offers 24/7 HR advice and employee retention support which is available 365 days a year. Want to find out more? Contact us on 0818 923 923 and book a free consultation with one of our HR consultants.