What is employee retention?
So, what is employee retention? Employee retention measures an organisation’s ability to retain employees for long periods of time. This is measured as a percentage, which is known as the retention rate. Businesses generally look to achieve a high retention rate in order to reduce the costs associated with replacing employees. A high rate reflects that staff are happy in their roles and work environment. However, typical retention rates can vary significantly across businesses and sectors due to several factors. This can include what type of business it is and the strategies it uses.
Due to this, an employee retention strategy can be put into place to improve retention rates or maintain them. A strategy implements practices to retain staff, using a variety of tactics like compensation, benefits, workplace culture, policies and employee engagement. The key goal of any retention strategy is to minimise the number of employees who leave the business.
Why employee retention is important
An employee retention programme is vital to maintaining a thriving business and achieving success. A strategic approach to employee retention helps you to retain quality team members for a longer period and prevent high turnover rates. It has long been recognised that replacing an employee is significantly more costly than retaining an existing one. These costs encompass direct expenses like recruitment and onboarding, as well as indirect costs like loss of productivity and company knowledge. Focusing on employee retention can save a company a substantial amount of time, resource and money.
Losing high-performing staff members can also impact the productivity of your team and their morale. There is usually a period of adjustment when someone leaves; other employees often take on extra work to ensure that everything gets done on time, with existing workflows disrupted to cover what has been left. This can go on for quite some time until a suitable replacement is found - which can take many months! This disruption often intensifies when a manager position, or higher, is vacant because it needs an expert with the knowledge to complete the work effectively.
Advantages of employee retention
There are multiple advantages of employee retention when the right strategies are implemented. These help to improve your overall business performance and allow you to strive for success. The advantages are:
- Lowering recruitment costs: Recruitment processes are very costly because they include resources to recruit, screen, interview and train a new staff member. If you retain talented staff for long periods, you can reduce the amount of money spent on recruiting.
- Improved efficiency: When you retain employees, you can improve your business’s efficiency and productivity. This is because long-standing embedded employees refine their skills for their role.
- Better customer experience: Having a team filled with experienced employees provides you with the ability to give exceptional customer service. These staff members are more likely to respond to customer questions and concerns confidently and quickly.
- Boosts employee morale and loyalty: Providing a positive work environment significantly boosts employee morale and engagement. Employees feel more at ease in the workplace and committed to the company and their role, making them want to stay with you. With employee engagement, you can build loyalty and retain employees for many years.
- Less training time: Because you retain more employees, you don’t have to go through the tedious hiring process. This means you also don’t have to spend lots of valuable time training new staff members.
How to improve employee retention
If you’re wondering how to improve employee retention, then we are here to help. There are multiple employee retention tactics you can implement to help improve employee turnover rates. Defining a strategy for employee retention will depend on varying factor including your industry, work environment and staff members - it’s all about finding what works for you and your team. However, whilst it’s not always a one-size-fits-all solution, there are elements that work across the board that form the base of a good employee retention strategy.
Provide a competitive salary
One of the key elements of retaining employees is getting the pay right. Many employees leave companies because of their salary and feeling they are unfairly compensated. They can feel unappreciated and undervalued due to their wage not reflecting their position and hard work. It is a major factor in high turnover rates, so it is important to provide your staff with a fair and competitive wage. Without getting this basic element right, you will struggle to retain staff members for long periods of time.
Salary levels should be reviewed over time (ideally at least annually), and should be adjusted to reflect experience and rises in the cost of living/inflation.
Encourage a work-life balance
When determining your employee retention tactics, you should encourage employees to have a better work-life balance. Since the pandemic, there has been a shift in how employees work. They now value a place where they can work efficiently while having plenty of time for their lifestyles. A work-life balance allows staff to switch off at the end of a working day and enjoy their home lives. This boosts mental health, making staff happier at work and therefore, more productive and engaged in their job roles. Happy employees, who achieve a good balance of work and home life, are generally more engaged employees – greater engagement generally results in employees who stay with the company for longer.
This can be achieved with flexible scheduling which allows for people to work when is best for them, hybrid or remote schedules and reduced workdays.
Recognition, compensation and benefits
If your employees feel seen, recognised and rewarded by your company, they are more likely to stay for the long term. Being rewarded and recognised makes staff feel valued and happy in their roles. This can also encourage them to work harder and improve their productivity levels. A good employee retention programme goes beyond salary and benefits, with strategies that make employee feel heard and appreciated.
Employee retention strategies that can be used to help engage your people:
- Gift cards
- Paid time off, e.g. wellness and volunteering days
- Retention bonuses
- Thoughtful gifts
- Team days out
- Engagement surveys / ‘Stay’ interviews
- Reviewing the ‘waiting time’ for certain benefits
- Communicating the wider reward package
- Incorporating clear learning and career development opportunities
- Creating a positive work environment, e.g. free snacks, wellness spaces, games room.
Be sure to ask for feedback from employees about what they would like to receive from your company to help inform your approach.
How can Paydata help with your employee retention programme?
Paydata can help you establish a successful and well thought out employee retention programme with our reward strategy consulting services. We aim to develop pay and performance systems that fit with and reinforce your business strategy. We can build employee retention tactics around your organisation’s requirements and needs to give you a competitive advantage. Find out more here.
If you have any questions or would like to know more about our reward strategy consulting services, please don’t hesitate to contact our team.
