Employee retention in small and medium businesses can be overlooked in the enthusiasm for finding new talent and completing day-to-day tasks. This is dangerous as it is often the deciding factor on whether a company achieves success and creates sustainable growth.
Employee retention affects organisations of all sizes, all over the world. But for smaller or medium-sized enterprises, the problems that come from a high turnover of staff can be magnified.
In this guide we will take a detailed look at what employee retention is, discuss the problems it can cause, as well as look at ways for businesses to avoid them.
What is Employee Retention?
Employee retention measures how many employees stay working within their current company over a given time period. All businesses face a natural turnover of staff over time but it is often the companies who retain staff for longer that are more successful.
Employee turnover is essentially the opposite of employee retention and refers to the number of employees who leave a business over a specified time period. This may be because they find employment elsewhere, retire, get fired, or are made redundant.
Retention rates are often given as a percentage. For example, a retention rate of 60% means that 60% of employees at company stayed within the given period. In a company with 100 staff members this would mean that 40 of these employees left over the timeframe (businesses often use a year). For a small business, that’s a lot of people to replace.
What Is A Good Employee Retention Rate?
Different industries have varying targeted retention rates. The average employee retention rate that most businesses aim for is often around 80%. This allows them to keep the main core of staff while replacing those that are ineffective or dissatisfied.
What Issues Can Poor Employee Retention Lead To?
Companies put a lot of focus on hiring the right people, but making sure they stick around is just as important. Although some employee turnover is unavoidable, a low staff retention rate can cause significant damage to small and medium-sized businesses for several reasons – often interrelated. Here are a few consequences of a low employee retention rate:
Loss Of Money
Studies focusing on employee retention have found that the cost of losing one employee on average amounts to roughly 30% of their annual salary. That’s a lot of money that could be better spent investing elsewhere in the business.
Hiring people is an intense process that can take resources away from where they are needed. A poor employee retention rate requires businesses to frequently hire new employees, who require training and supervision.
This takes time from current employees and can lead to other tasks and goals being sidelined. On top of this, recent staffing additions are more likely to make mistakes or complete work poorly which may cost the company money.
Loss Of Knowledge
When valuable employee leaves a company, they take valuable information with them. Although a business may have processes in place to mitigate this, often there’s simply not enough time for all the information to be successfully transferred.
Long-standing employees have years of expertise and experience to call on when making decisions. This knowledge is invaluable and can be lost forever when they leave.
Loss of Professional Connections
In client-focused industries, a lot of decisions are likely to depend on relationships between employees and external partners. A low employee retention rate means that businesses will need to spend significant time and effort rebuilding these connections or they could be lost forever.
Loss Of Staff Morale
A low employee retention rate can become a staff moral problem. Frequent departures can make employees more aware of their own dissatisfaction, or insecure about whether their position is secure. They may also have to work extra to train new staff or deal with staff shortages. This makes them more likely to look for new roles themselves, exacerbating the situation further.
How Do You Increase Employee Retention Rates
Implementing employee retention strategies can help a company increase employee retention, which will not only save money, but ensure staff are happier and more satisfied in their roles. Here are a few ideas to help keep staff happy:
Refine The Hiring Process
A declining retention rate could signal that a company is hiring the wrong candidates. This often happens when businesses want to grow their employee base quickly to cover an increase in demand.
When hiring a new team member, it’s easy to focus on the person’s skills rather than the qualities that make them a good fit for your organisation. While you’re sifting through CVs it’s important to keep in mind your company values and if the current pool of candidates shares the same principles.
Promote Recognition And Reward
Encouraging a culture of recognition is one of the most effective ways to increase loyalty and boost employee engagement. Some recognition and reward programs increase employee retention by enabling employees to feel valued and secure.
If you don’t have a recognition and reward program, simple gestures, such as a thank you note or a small personal gift goes a long way in showing your appreciation. If finances are tight then non-monetary rewards, like an extra day of annual leave, can work just as well.
Ensure Your Staff Have A Good Work-Life Balance
A healthy work-life balance is important, especially in the post-pandemic world. Because of this, it is important that companies offer a sustainable way of working. There’s a fine balance between getting the most out of your teams and overworking them.
A robust well-being strategy is an effective solution for tackling stress and mental health issues and can make your organisation a healthier and happier place to work.
Offer A Competitive Perks And Benefits Package
Implementing a comprehensive benefits package will demonstrate to employees that you want to retain their services and will prevent them from wanting to move on. If the perks you offer add value to their lives then why look elsewhere?
By following the employee retention strategies laid out above, businesses can keep staff happy and achieve increased productivity, job satisfaction, and happiness. This in turn will prevent staff from looking elsewhere for work.