Managing retention of hard working, motivated and positive workforce is very much needed for the success of any organisation. Problems in retaining an efficient employee can be the worst nightmare for an employer as it brings a whole new set of challenges to handle, on top of the daily activities for the businesses. With high employee turnover comes increased expenses and it also has a negative impact on the morale of an organisation.
Employee retention is defined as the ability of the organisation to retain its employees. In other words, it can be considered as a process where the employees of the company are encouraged and motivated to remain in the organisation for a longer period of time. This helps in reducing the employee turnover, which in turn decreases the cost associated with recruitment and training of the new staff.
The ultimate goal of Employee Retention in any company is to make both the parties, i.e., employees and employer satisfied. As loyal employees stick to an organisation for a longer period of time, both the stakeholders get equally benefitted.
Importance of Employee Retention
Employers value employees who understand their requirements and have the willingness to work hard. Retention of smart, positive and motivated workforce is very much required for the success of the organisation.
If your company is not able to retain the correct workforce, imagine the amount of money, resources and time that will be spent in replacing them with new staff. With the existing staff trying to help out new additions, the company will see reduced productivity and increase in errors.
Implementing an effective employee retention program is very important to make sure that the key and significant workers remain employed in the company. This helps in balancing and maintaining the productivity and performance required for the job.
Let’s look at some statistics that gives you a clearer picture of the scope of employee retention problem:
- A report from Work Institute found that organisations paid more than $630 billion in voluntary turnover costs in the year 2019
- The same report shows that about 10.8% of interviewees in the US left their jobs just within 90 days of joining. Employees who leave in the first 90 days of contribute little to no return on the investment made by the company to hire them
- A survey from the Washington Post revealed that almost 71 percent of U.S. workforce wanted to change their employers
- A global survey of employees made by Deloitte last year in 2020, revealed that about 31 percent of the employees were not satisfied with their jobs and wanted to leave
Thus, we can see that high turnovers in companies can lead to excessive costs and unwanted end results.
Here are some of the reasons why we should consider employee retention an important aspect for the success of any organisation:
1. Recruitment process is not an easy task – As you know, recruitment is not an easy task and it takes a lot of effort to hire the right candidate for the job. Hiring a wrong candidate can cause a loss of time, money and resources for the company. Thus, it’s much easier to retain the existing talent for a particular job rather than losing him or her and searching for new talents.
2. Expenses related to Employee turnover are very high – According to a report from Employee Benefit News (EBN), an employer spends around 33% of a worker’s annual salary in order to find a replacement to the worker who has left. For example, the company has to bear an expense of $15,000 per person as a replacement cost for an employee whose annual salary would be $45,000.
3. High turnover disrupts team work – If your team experiences a large number of turnovers, it will result in low morale for the working staff. Your team members may experience increased workloads and responsibilities to cope up with the gap created by an active and trained workforce who just left your company.
Not just the existing employees, but even the new hires may experience low morale in struggling to learn new job requirements.
4. Your competitors can gain on your loss – Imagine you trained your staff for one year on a highly sophisticated technology and then they leave and join your competitor. Your competitor company will definitely gain from the knowledge and skills from the workforce you lost.
Companies should try their best to retain the knowledgeable team members if they want to have success in their businesses.
Best practices to improve employee retention rate
Here are some of the best employee retention strategy that can help to boost the job satisfaction of your employees and increase your ability to retain them.
Healthy Work-Life Balance
A healthy work-life balance in an ideal situation would mean that an employee is able to properly divide his or her time as well as energy for both work and their personal lives. It’s one of the most important factors for successful employee retention.
The employers should ensure that their staffs are not stresses too much at work and they have an appropriate balance between both work and personal responsibilities. This will lead to employee happiness and avoid situations where you find a lot of disengaged employees within a team.
Work-life balance is the most important factor for employee satisfaction & retention.
Source – shiftboard.com
According to a survey by TINYpulse, workers with good and positive work-life balance are 12 percent more likely to stay at their jobs. While those who often feel tired and stressed are 31 percent more likely to look for new jobs.
Employee engagement refers to the creation of a positive work environment within the organisation to ensure that the workforce has majority of motivated employee such that the they feel willing and able to perform their duties at the best.
If there is no engagement at work, it lowers the employee morale, and they will not have enough reasons to remain in the company. Higher engagement leads to happy employees and they are more likely to stay in their organisations, thus reducing the overall turnovers and costs associated with it.
It is a well-known fact that those who pursue professional development in their career path are the ones who tend to have higher productivity and satisfaction at their jobs.
Employers should ensure that they create sufficient opportunities for both formal as well as informal development of their employees.
According to a retention report from the Work Institute, 21.5 percent of the employees quit their employers due to the lack of growth and development opportunities. Another report from EdAssist revealed that if the prospective employees are given an option to choose between two similar jobs, 60 percent would tend to pick the job that has strong potential for professional development over the ones with regular salary hikes.
Leadership development programs should be considered as an important component to improve an organisation’s retention rates and employee productivity. However, many companies find it hard to give priority for the implementation of leadership programs because of limited resources and time constrains.
Although majority of employees would desire a growth in their career trajectory and leadership development, companies do understand that not all workers can become a great leader or a manger. Though employees can be given the opportunity to attend various mentorship programs where they can be guided on their professional journeys.
Organisations need to identify and retain the critical resources by developing leadership training programs based on their capabilities. Leadership programs are a means to show your employees that you appreciate their efforts.
Offering the right benefits
Today’s candidate-driven job market faces strong competition to attract and retain employees. Companies that offer benefits like coverage of health insurance costs, performance bonus, paid sick days, advance payment, etc are able to achieve better employee attraction and retention.
According to a survey from Glassdoor, 80 percent of the employees prefer additional benefits over increased salaries. Top 5 preferred benefits included:
- Health care insurance (40%)
- Paid vacation (37%)
- Performance bonus (35%)
- Paid sick leave (32%)
- Retirement plan or pension (31%)
Other low-cost benefits that have started trending since the COVID-19 pandemic includes work from home options and flexible working hours.
Health insurance provided by the companies does not only attract new workers but also contributes as a leading factor for retention of employees. In the West, where medical expenses are huge, a large percentage of workers indicate the importance of health benefits in selecting and remaining in a particular job.
A survey done by SHRM shows that 56 percent of the U.S based employees accept that employer-sponsored health benefits is a main factor in determining their stay in the job. On the other hand, 46 percent of them agreed that health insurance was a deciding factor for them to even choose their current job.
Next only to the healthcare benefits, a retirement plan is one of best employee retention strategies to encourage the workers to stay in an organisation. A MetLife study found that retirement benefits were essential to earn loyalty from the employees. As per this study, 4 out of 10 workers stated that retirement plans given by the company were a major reason for them to stay in their company.
Another survey from Global Benefits Attitudes done on global professionals reveals that majority of workforce believe that retirement plans were the top source of income for many employees after the end of their employment period. Thus, employers should consider using retirement plans as a top benefit to retain their employees.
Final Thoughts on Retention
As an organisation and its hiring team, you put a lot of effort in sourcing, hiring and developing the best resources for your company. Having great retention strategies will give you optimal return on investment by helping you attract the best talents and having reduced turnovers.
With good retention plans, finding replacements for occasional job openings won’t be a pain as candidates will be eager to join a firm that values its employees by offering opportunities and rewards that are hard to resist.