With millions of job openings and a noticeable skills gap, employees have several opportunities. There’s simply not enough great talent to go round. When it comes to work, people have the chance to find the right company culture fit. If you want to attract and retain top talent, employee retention should be a key focus for organizations.
Frequent recruiting and high employee turnover not only drain resources but can impact morale and your reputation as an employer. By effectively listening to your employees, you can start to build an employee retention strategy based on your people.
From investing in employee development to supporting their well-being, employee retention takes on different forms. In this article, we try to understand the importance of employee retention and explore best practice retention strategies you can implement in your business.
Skip ahead to:
- What is employee retention?
- Why is employee turnover and retention matter?
- What is a good retention rate?
- 9 best practice employee retention strategies
What is employee retention?
Employee retention refers to the extent that an employer retains its employees. It can be measured by a specific length of service or as a percentage representing the whole workforce. When talking about employee retention, you’re referring to the company’s ability to hold on to its employees. Employee turnover refers to a proportion of employees that leave after a certain amount of time. Several factors influence employee retention and turnover within an organization.
A strong employee retention strategy supports overall employee engagement and productivity. Here are some key statistics that show the current state of employee retention across various industries:
- On average, low retention will cost the US $430 billion annually by 2030.
- 87% of HR professionals view employee retention as one of the highest priorities.
- 65% of employees think they can find a better position somewhere else.
With more than half of employees thinking that another position will be better, you can see how employee turnover and retention can become an issue for organizations. Now is the time for modern employers to think about what they can do to retain employees long-term.
Why does employee turnover and retention matter?
When an employee leaves you, there is a time, cost, and effort investment associated with finding someone new. There are perfectly viable reasons why someone leaves a company that you have no control over. Sometimes, it’s time for a move, retirement, or change of career. But when you struggle to retain employees, it can lead to a serious waste of resources.
The entire job recruitment process takes time. After creating the perfect job listing and sifting through what feels like thousands of applications, you finally find the right candidate. It’s easy to think that your job is done. While hiring a new employee is a great moment and a time to celebrate, it doesn’t necessarily mean that they will stick around. Getting the best person for the job is half the battle, getting them to stick around is the next hurdle.
The bottom line is that if employees don’t feel appreciated in their job, they won’t stick around. You will lose rockstar employees to businesses that do utilize employee retention strategies. Turnover can be catching. When an employee leaves, it can have a big impact on morale and productivity within the team. In addition, it can leave a knowledge, skills, and relationship gap in the business. This could lead to overworking other members of staff and burnout.
If you begin to gain a reputation as an employer with a high turnover and low employee retention, it can be difficult to shake that. When you scout for new hires, potential employees will do their research to see if you are a good fit for them. Overall, retention is an important part of employee engagement and making your staff feel appreciated and valued.
What is a good retention rate?
So, what is considered a good retention rate? It’s difficult to give a precise number as there tends to be a big variation between industries. But, according to one study, the average total turnover rate for all industries is 17.7%. In general, an employee retention rate of 90% or above is considered good. Industries that tend to have higher retention rates include governments, insurance, and finance.
Interestingly, 30% of new employees usually quit in the first six months of a new job. Also, one-third of employees already knew they would quit within the first week of working at a new job. It’s clear that employee retention starts from the moment your new employee signs the contract.
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When it comes to the reasons why employees leave, there are external and internal forces at play. There are some milestones that you have no control over. If an employee wants to move to a new city, have a child, or retire, you have no control over these. It’s natural for these life milestones to occur. However, there are several reasons why employees leave that are completely in your control. Some of the top reasons employees quit include:
- Lack of recognition and appreciation
- Lack of growth and professional development opportunities
- Poor management
- Poor work-life balance
- Toxic working environment or workplace culture
- Bad hiring process
- Poor compensation
9 best practice employee retention strategies
From flexible scheduling to development opportunities, these programs and initiatives are collectively known as employee retention strategies. The aim of these programs is to create a great place to work, increase retention, and reduce employee turnover. High employee turnover is costly and affects the performance of the organization. By implementing strategies that align with the needs and wants of your employees, you can re-evaluate your retention strategy effectively.
1. Ask for employee insights
There are several ways you can obtain employee insights. A standard way of asking for feedback is through an exit interview. Use an exit survey to gain valuable information on why an employee is leaving and the overall employee experience. Whether you have a low or high employee turnover, you can find out exactly why an employee is leaving and areas where you could improve the business. While exit interviews are great for gaining information, it’s also important to find out why employees stay. Companies can use real-time employee engagement surveys, emotion monitoring apps, and feedback forms to gain access to employee insights.
2. Clear onboarding process
Your onboarding process is crucial to retention. Considering that a proportion of employees often leave within the first six months of a new job, your onboarding process is an essential part of your overall retention strategy. Onboarding is about more than signing a contract, going on an office tour, and setting up a desk. By creating a long-term onboarding process, you can target several areas and optimize the journey for retention. Your onboarding process is a great opportunity to develop a long-term employee development plan, connect employees together, set expectations, and create an open platform for communication.
3. Competitive employee compensation
According to Glassdoor, 35% of employees say that if they don’t receive a raise in 12 months, they would start looking for a new job. While your compensation package may not be a reason to stay, it is a major reason why employees leave. When considering a new job, a competitive compensation package is a key factor. Not only is it important to offer competitive employee compensation, but it’s essential that you update your compensation regularly. Ensure that pay is fair across the organization and consider the latest market rates for your employees.
4. Continuous feedback performance
Often, little ongoing feedback can cause an employee to leave. Feedback can include positive comments, but also framing concerns and suggestions in a positive light. Advice on how to improve weaknesses should be constructive with actionable tips to move forward and grow. Nowadays, employers are no longer relying on a yearly review. Instead, they are utilizing regular meetings to open the lines of communication. In these meetings, employees can make long-term goals and develop plans with managers, receive constructive feedback, and feel recognized within the company.
5. Training and development options
According to LinkedIn data, employees at companies with good internal mobility are twice as likely to stay almost two times as long as those who don’t. Interestingly, the learners are not only likely to stay for longer, but also be more engaged employees. It makes sense that employees who feel like they can’t progress or have the opportunity to further their careers go elsewhere. Top performers are more likely to explore job opportunities with companies that show training and development opportunities. Employees want to learn, develop, and grow and actively investing in your employees is crucial.
6. Flexible working environment
The pandemic has changed the way many people work. Flexible working environments and remote working look here to stay. Over half of employees would like to work from home three days a week after the pandemic. While employees still see the value in the office for team collaboration and communication, flexible work schedules and options are now an essential part of employee retention. Remote work is also a big factor in attracting new talent. Employees are looking at both fully remote and partly remote working options with good compensations and benefits packages to fit with their life.
7. Show employee recognition
Research shows that employees without a recognition program had a 20% higher intention-to-leave score. Strong employee recognition practices support employee satisfaction and retention. Keeping your team members happy and feeling valued is a long-term process. By implementing a recognition program where you regularly show your appreciation to employees can make a huge impact. Fortunately, it’s not too late to implement a recognition program to begin to create the type of company culture you want.
8. Support employee health and well-being
Health care benefits and employee well-being programs support employee retention. Wellness programs and a healthy work-life balance support your employee’s overall wellness. It’s important for employers to show awareness around health and well-being. Consider how you encourage employees to take time off or take a lunch hour to clear their heads. Workplace wellness offerings can help to secure employees. Creating a wellness program that works for your employees and culture is a challenge. But investing in wellness perks, health insurance, and health benefits packages is crucial for good employee retention.
9. Career advancement opportunities
In addition to learning opportunities, consider career advancement options within your company. Career development and advancement consist of short-term and long-term goals that allow employees to see their current development and future ambitions. Having the ability to grow within a role is vital to job satisfaction. According to Indeed, searching for job growth and career advancement is one of the reasons that employees leave. Many employees leave a job because of a lack of career development options. When employees feel like they can’t progress, it can make them feel stuck and stagnant within a company.
By aligning your employee retention strategies with your company’s mission and goals, you can reduce turnover and increase retention. While employees can come and go, a spike in resignations may be a signal of a much larger problem. By supporting your employees and keeping your staff happy, you can create a positive working environment to help you retain the best employees. Effective employee retention strategies involve a good balance of compensation, career development, flexibility, and a positive working environment. By leveraging employee insights, you can continue to optimize your retention strategy and onboarding process so that it remains relevant for years to come.