The “Great Resignation” is upon us and you can’t ignore it. At least, not if you’re hoping for a thriving business. If it isn’t already on your mind, it’s time to look into employee retention strategies and add to your to-do list for 2023.
Headaches aside, the cost of losing an employee can be astronomical for small businesses and those with smaller profit margins.
In this article, you’ll learn what employee retention and turnover are, take in some eye-opening statistics, and read some of our best employee retention strategies (that you can totally steal for your own business).
This article can save you money, so don’t skip it.
What is employee retention?
Employee retention refers to a company’s ability to keep their employees in their roles and prevent employee turnover—that is, people leaving their job at the company voluntarily or involuntarily. A company’s ability to retain staff is measured using employee retention rate.
A high retention rate at your company means you’ve got employees who stick with you for years. A low retention rate means that you’ve got lots of people leaving the job regularly––either voluntarily or involuntarily. Knowing your employee retention rate is a pretty important stat for small businesses.
Employee retention strategies will directly affect your bottom line. Every business should strive for high retention rates so they aren’t going through the perpetual cycle of hiring and training new employees––which costs you wasted time and money.
|Did you know? According to new research of more than 600 US businesses with 50-500 employees, 63.3% of companies say retaining employees is actually harder than hiring them.|
But how do you know if an employee is thinking of leaving? Here are some tell-tale signs:
- Decreased productivity or initiative. Maybe they don’t work as hard as they used to.
- Negativity. Is there a shift in their attitude towards the job or management?
- No interest in long-term goals. If an employee is out hunting for other jobs, they sure aren’t going to commit to a long-term goal for the business.
- Lack of enthusiasm. Things that your employee may have been excited about before––for example game days when they’re bartending––just don’t hold the same appeal anymore.
As an employer, you can’t ignore employee retention. You need to get to work on a solid employee retention plan so you keep your best employees with you––not heading out the door to your competitor.
What is employee turnover?
Business news daily says, “Employee turnover is the rate at which employees leave a company within a set period of time.” Employee turnover is a way to calculate your employee retention rate.
But how is employee retention measured?
If you want to calculate your employee turnover rate, you’re going to need to divide the total number of employees who have quit by the average number of employees you have on staff.
Let’s say in 2022 you had 10 people quit and you averaged a team of 47 employees. You divide 10 by 47 to get 0.21. Your turnover rate would be 21%.
Numbers can be scary, but knowing the data can only help you improve.
Before you can even think about how to improve employee retention, you need to understand why people are leaving their jobs.
Why are workers leaving their jobs?
Leaving a job is never an easy decision. No one makes it lightly. The reasons can be very personal or very specific to their current workplace, but over the years themes have emerged. So, why are workers leaving their jobs?
They need better pay
Obviously, in an ideal world, we wouldn’t have to worry about how much money we made and we could all just do something we loved. But bills need to be paid. If an employee isn’t making enough to cover their basic financial needs then they’re going to start looking elsewhere.
They feel overworked
When companies try to run on a lean team, they can often overlook how much pressure this puts on their employees. This can get even worse during busy seasonal times if their boss doesn’t hire seasonal employees to support them with the rush. When employees are overworked, they burn out quickly.
They go unrecognized for their hard work
Everybody needs to hear they’re doing a good job. Employee appreciation can be a top factor for an employee staying at a workplace. If an employer doesn’t recognize the work that they do––in particular when they go above and beyond––they’re going to find an employer who does.
They need better work-life balance
If you expect your employees to always be on, never take their PTO, and to work long hours, they may leave you for better work-life balance. Millennials and Gen Z in particular put work-life balance at the top of their ‘needs’ list when looking for a job.
They’re unhappy with the company culture
Company culture can be anything from your employee handbook to how your managers treat your team members to the company values. Gone are the days of people just accepting toxicity in the workplace. People start job hunting real quick if they feel the company culture goes against their beliefs and makes their lives difficult.
While these are bigger reasons why workers leave their jobs, they can be as small as sheer boredom or the desire to make a change. Whatever the reason, you want to do everything you can to lower that employee turnover rate with an employee retention strategy, because there can be some big consequences to losing workers.
The cost of not having employee retention strategies
Losing an employee is pricey for small businesses. The cost adds up quickly if you figure in:
- The loss of productivity for the employee whose head is somewhere else
- The cost of the hiring process
- The cost of training a new employee
- The added loss of profitability while the new employee learns the ropes
In fact, it’s estimated that it adds up to about $6,000 per lost employee to replace them.
With that hefty price tag, every business needs to implement a solid employee retention plan.
|Did you know? GoBankingRates says that the cost of replacing an employee can be anywhere from 33% to 200% of that employee’s annual pay.|
The top employee retention statistics you need to know
Seeing the data can really drive home the importance of an effective employee retention strategy for your business. Here are some key employee retention statistics you need to know:
They don’t call it “The Great Resignation” for nothing
In October 2022, 4 million Americans quit their jobs. This left 10.3 million jobs open and thousands of employers scrambling. With a lack of support for working parents and frontline workers constantly in dangerous scenarios, people changed their work priorities.
Employees are overworked and anxiety-ridden
Business psychologist and HR consultant, Dr. Tiffany Sanders says, “approximately 40% of all workers today feel overworked, pressured and squeezed to the point of anxiety, depression and disease, and 63% of Americans report they are not coping effectively with stress.” This isn’t great news considering being overworked is one of the main reasons people leave their jobs.
A high percentage of employees are looking for their next role
46% of respondents to a survey run by Robert Half Talent Solutions said that, during 2023, they’re currently looking or plan to look for a new role. Since the pandemic, employees have new expectations of their jobs and their managers. If they aren’t being met, they’re out.
Salary has a massive impact on the job hunt
61% of workers say that a higher salary is the main reason they are looking for a new job. It’s no longer a secret that one of the fastest ways to make a higher salary is to switch to a new employer. If their current employer won’t give them a raise, they’re going to go hunting for an employer who gives them the salary they want.
Appreciation is key for employees
46% of U.S. workers say they left their job because they were unappreciated. Appreciation may seem small but it can go a long way for employees. Luckily, for companies with a culture of appreciation, 56% of employees are less likely to leave.
Now that we’ve looked at a bunch of scary stats for employee turnover, let’s spin it positive and look at how to prevent it. We’re going to take some time here to discuss the #1 way to retain your employees––through employee engagement.
What is employee engagement and what are the benefits?
Employee engagement is, according to Forbes, “the emotional commitment the employee has to the organization and its goals.”
An engaged employee is going to:
- Help improve company performance. They truly care, so they’re going to help achieve company goals.
- Increase profits. More productivity and less absenteeism equal more profitability.
- Provide better customer service. They take pride in their work and speak well about the company.
- Help to lower attrition. Because they’re 87% less likely to leave their jobs, they reduce the turnover costs of hiring new team members.
|Gallup finds that it takes more than a 20% pay raise to lure most employees away from a manager who engages them, and next to nothing to poach most disengaged workers.|
What’s interesting is that in this digital age, only 16% of businesses are actively using technology in their employee engagement strategy.
You can use technology to increase and then measure employee engagement. Start by using the Homebase team communication tool to survey your employees and their levels of happiness and engagement at work. Once you have that information, start to use technology to your advantage to engage your employees.
Here are some ways you can use Homebase to increase employee engagement:
- Set up the messenger tool with your team to make it easy for them to create connections with coworkers
- Use the scheduling feature to easily remind your employees of their shifts and let them know if shifts are available for pick up
- Track their performance metrics and give them public shout outs when they reach milestones
- Collect ongoing feedback after shifts and implement the suggestions
Don’t skip out on using technology to measure employee engagement.
Employee engagement and employee retention really do go hand-in-hand. You can’t think about retaining your employees without coming up with a strategy to engage them.
Ideas for employee retention strategies
Finally: let’s start building your employee retention strategy! Here’s a list of ideas to improve employee engagement and develop a retention plan.
1. Make employee appreciation a priority
We all need to hear it: good job! Those two words can make our day. But we’ve learned that words aren’t always enough; you need to show your appreciation. There are many ways you can show appreciation for your employees.
Thank you cards are a great start. Public shoutouts on your team communication messenger app are even better. Public appreciation motivates other employees to work hard for those accolades.
You can take appreciation even further by making a big annual event to show your entire team that you appreciate their hard work for the past year. Fun games, great food, and silly awards can go a long way to retaining your employees.
Make appreciation a part of your company culture and never take it for granted. Show your employees appreciation every day.
|Bonus tip: set up a recognition and rewards program. Gamify your appreciation with perks like tickets to an event, gift cards, movie passes, or an extra day off. You can set up a rewards system even with a small team on a small budget.|
2. Be a good boss
A good manager can make or break a workplace. They set the entire tone for the rest of the team.
A study from the consulting firm McKinsey found that, while an amazing salary kept people in their jobs despite a bad manager, that’s not the case anymore. “Uncaring and uninspiring” managers are the major reason people quit their jobs.
The qualities of a good manager are:
- Good and consistent communicators
- Active listeners
- Hold themselves accountable
- Gently challenge their employees
If you own a small business, make sure to look for these traits when hiring or promoting someone to a managerial role.
If you’re a manager, take personal development courses to learn to integrate these qualities in your managerial style.
3. How flexible are you?
A study by Future Forum found that flexibility is the main reason people stayed in their jobs. So, how flexible are you?
Do you offer shift schedule options that fit into your employees’ lives? As we mentioned before, work-life balance is important for Millennials and Gen Z, who make up the majority of the workforce. If you have flexibility in how they’re scheduled, they’re more likely to stick around.
If employees are able to take time outside of work to recharge and spend time with loved ones, they’re much less likely to quit.
4. Ask for feedback and be open to change
If you’re worried about your turnover rate, the best––and hardest––thing you can do is ask your employees where they’re dissatisfied at work.
You can ask what parts of the role they enjoy and what parts they dislike. Ask them what changes they would like to see. Ask them where they feel management can support them. When your employees are on the floor all day, they see things you can’t possibly see.
Your greatest resource is your employees. Ask for regular feedback and we bet that you’ll see that turnover rate go down: as long as you listen and implement.
|The Homebase team communication tool can help you collect feedback from your employees on the regular. Store it all in one place and action the points that come up the most.|
5. Give your employees a purpose with your company culture
Does your company culture support your employees’ interests, strengths, beliefs, and well-being?
- Building a company culture that values diversity, equity, and inclusion goes a long way for your Gen Z employees who have lived through some tumultuously political times these past few years
- Having a health and wellness plan for your employees shows them that your company values their health and well-being
- Creating a breathing space for them at work––like a beautiful breakroom––can signal that you see how hard work can be and you want them to have a safe space to go when they need a minute to check out of what’s happening on the floor
- Offering an easy way to offer feedback and communicate with managers lets them know that your company culture values open communication and their opinions
Ask yourself: how is my company culture signaling to my employees that we value them being here?
6. Let’s be honest: money talks.
It’s never easy to talk about, but people are motivated by money. With inflation at an all-time high, we can’t be upset when employees are leaving their job for better pay.
Take a look at your pay brackets and ranges and take a look at your employees who are consistently going above and beyond. Does their pay align with what you are able to offer them? Offering a pay raise preemptively goes a long way for retaining employees. Often employees are already halfway out the door if they feel they’re under-compensated.
If you have a tight budget or are bound by strict pay bands, are you able to offer different forms of compensation? A big company discount? Discounts at surrounding businesses who may agree to collaborate? Free meals? Paid time off?
If your automatic response is, ‘We don’t have the budget’, please remember that it costs––on average––$6,000 to replace an employee. That money would be much better spent retaining your current employees.
Ok. You know what employee retention is, what your turnover rate is, what it’s costing you, how to engage your employees, and some ideas for employee retention strategies––now it’s time for you to go out and action all of this.
Don’t get overwhelmed. Take it one step at a time. Once you start implementing your retention plan, your employees and your bottom line will thank you.
Make your retention strategy easy.
The Homebase team communication tool offers incredible features that can help you build and maintain employee retention strategies. Get started today.
Employee retention strategies FAQS
What is employee retention?
Employee retention is a business’s ability to keep its employees in their roles. If you have a lot of people on your team quitting regularly, you’ve got a low employee retention rate. If you have people on your team who stay at your company for years, you’ve got a high employee retention rate.
How do I calculate my turnover rate?
If you want to calculate your turnover rate, follow these steps:
- Step 1: Pick a set period of time. For example, from March 2022 – March 2023
- Step 2: Figure out how many employees you had on your team on average for that period of time
- Step 3: Add up how many people quit their jobs at your company during that time frame
- Step 4: Divide the number of people who quit by the number of people you employed
Step 5: Multiply that number by 100 to get your turnover rate in percentage.
What is employee engagement and why is it important for retention?
Employee engagement is more than employee happiness and more than employee satisfaction. Engagement is about how invested your employee is in the goals of the company. An engaged employee goes above and beyond and is a huge asset for your business.
When an employee is engaged, they are way less likely to leave their job. That’s why engaging employees at work is one of the best employee retention strategies.