7 Ways Employee Retention Benefits Your Company
Your company has its own employment dynamic, but the situation probably isn’t what you want it to be. Maybe you want to cut employment costs, stop spending so much time on recruitment, or find a way to boost sales. For any of these goals (and many more), employee retention is an excellent solution. Let’s explore exactly how.
Businesses benefit in a wide variety of ways when they focus on employee retention. These benefits, which we’ll go over below, include:
- Reduced Turnover Hassle
- Improved Morale
- Reduced Acquisition and Training Time
- Dedicated Company Experts
- Increased Overall Productivity
- Better Customer Experience
- Reduced Costs and Higher Profit
If you’re already convinced of the importance of retention, we’ve also provided some of the top strategies. Skip right to it here.
#1 – Employee Retention Reduces Turnover Hassle
Employee turnover is a natural aspect of any business, but high turnover can be a hassle. Every employee that leaves takes a significant chunk of your time and resources with them – from lost productivity, to the time you spend searching for their replacement. Then there’s the sea of documents related to the change in employment, (not to mention a tidal wave of incoming resumes).
While each of these aspects is essential to replacing the lost employee, they’re also a huge pain to deal with, particularly when you have better things to be doing. Focusing on employee retention can help reduce all-around hassle and wasted time.
How much of a problem is turnover for your business? How do you compare to your industry average? Check out the table below:
|Turnover Rate By Industry
(Bureau of Labor)
|Industry||Turnover Rate – 2017|
|Mining and Logging||47.8%|
|Trade, Transportation, and Utilities||45.0%|
|Transportation, Warehousing and Utilities||41.0%|
|Finance and Insurance||24.4%|
|Real Estate, Rental, and Leasing||36.5%|
|Professional and Business Services||64.1%|
|Education and Health Services||32.3%|
|Healthcare and Social Assistance||33.2%|
|Leisure and Hospitality||73.8%|
|Arts, Entertainment, and Recreation||82.0%|
|Accommodation and Food Services||72.5%|
#2 – Employee Retention Improves Morale
Higher employee retention is a surefire way to improve morale and employee satisfaction almost across the board.
First off, turnover can be particularly brutal on the morale of a business. High turnover is a source of (understandable) employee anxiety. Since they know how quickly they can be replaced, the few employees who stay with the business feel expendable.
Second, consistent staff changes make it hard to develop the type of long-lasting friendships that can make a job that much more pleasant. Better working relationships means fewer disputes, less paperwork and bother for Human Resources, and an all-around happier workforce.
However, focusing on employee retention means building a team of dedicated, confident employees. Employees who stay at a company for longer:
- Become more comfortable and less stressed
- Develop better working relationships with their co-workers
- Enjoy seeing more long-term success and pay-off for their hard work
- Have a stronger sense of belonging and community
- Contribute more to company culture and building the business
In addition to direct effects of a more veteran workforce, each of your retention efforts shows your employees that they are valued. It might sound simple, but 76% of employees who do not feel valued look for other job opportunities.
#3 – Employee Retention Reduces Acquisition and Training Time
Anyone in human resources knows turnover eats up time. First, it takes time to find new employees who are qualified and reliable. Then, it takes time to set up interview rounds and negotiations. After that, it takes even more time to onboard employees. Finally, it can take a significant amount of time to train new employees. Adding up all the hours, turnover is a human resource headache.
By focusing on retaining employees, you can cut down on the time spent on those tedious new-hire tasks and get back to the more profitable (and, let’s be honest, exciting) aspects of running a business.
It’s worth noting that employee retention can also help you acquire new employees. As we just discussed, employee retention boosts morale. Happy employees are an incredibly effective recruitment and training tool.
Employees who are happy with their long-term work situation will be more likely to recruit from among their own network and put forward candidates, advocate for the business when attracting talent, be more enthusiastic and helpful during training, and help new employees assimilate more quickly into the company culture.
#4 – Employee Retention Creates Company Experts
Talent is all well and good, but sometimes it just can’t trump experience. Low retention means the experience and business-specific knowledge is continually being wasted – or worse, taken to a competitor.
Employees that have been involved in the company for longer also have a tendency to develop time-saving and problem-solving practices. As they become more comfortable and familiar with the business and industry, employees naturally begin see ways to make things better and more efficient. If a business keeps the employee around long enough to notice these opportunities, they will quite often share that good idea or observation.
#5 – Employee Retention Increases Overall Productivity
Not retaining employees comes with a slew of problems, but the most immediately bad for business is the blow to productivity. There are the obvious understaffing issues: positions going unfilled potentially mean delays, overtime, and more frequent or problematic mistakes.
Additionally, someone in a new job needs to form good working relationships and develop solid communication avenues with their co-workers – that social connection greases the wheels of collaboration and increases productivity all around. Time wasted on the results of miscommunication can stack up rapidly if the mistakes or misunderstandings are large enough.
In fact, all together, it can take 1-2 years for a new employee to reach the level of productivity of the employee they replaced.
#6 – Employee Retention Spreads the Love to Your Customers
By this point, we know that focusing on employee retention makes employees happy. Happy and engaged employees pass those feeling on to their customers. They provide better service, anticipate problems, and go the extra mile to make sure the company has a good reputation.
Employee engagement pays off. In fact, a report from Gallup found that employees who are engaged are more likely to improve customer relationships, resulting in a 20% increase in sales.
Beyond basic employee engagement, staff members who have been around for longer will also be able to solve complex or unique problems more quickly and confidently, which saves time, reduces work for others, and prevents lost business from unhappy customers.
#7 – Turnover’s Expensive – Employee Retention Saves You Money
Turnover is expensive. Costs can add up quickly, particularly as the position goes unfilled. Employees constantly moving in and out means potentially significant business costs associated with:
- Severance or other packages
- Recruitment and acquisition
- Hours spent on resume analysis and interviews
- Hours spent on onboarding and training
- Lost productivity
- More frequent (and costly) mistakes
- Lost revenue as a result of a downgraded customer experience
Depending on the role you are replacing, turnover costs can range from uncomfortably high to truly shocking. For a low-paying (traditionally high-turnover) job, it costs about 16% of the employee’s annual salary. This jumps to 20% for mid-range positions, and skyrockets to over 200% for high-level executives.
High turnover is particularly destructive because businesses end up paying these costs time and time again – sometimes even multiple times a year. Employee retention prevents these expenses.
Top Strategies for Boosting Employee Retention
We’ve established that employee retention has tangible financial and organizational rewards. Now, we’ll go over strategies you can use to actually boost your employee retention.
Even if it isn’t the most important benefit, a lack career development is the top reason that employees gave for leaving their jobs. Millennials overwhelmingly consider career development opportunities to be one of the most important elements of a company. Currently however, only half of employees said their employers provide career development opportunities that meet their needs and chances for advancement.
A job without career development is the classic “dead-end” job – and few things are less appealing for a long-term career prospect. People have a natural desire to grow and move forward, and offering opportunities for them to do that by developing their careers is a fantastic way to boost retention.
It isn’t a surprise that healthcare is the most important employee benefit. After all, it isn’t uncommon for someone to leave a career they love simply to have a job with good health benefits. Offering an attractive healthcare plan is an ideal strategy for recruiting and retaining high-value employees.
However, offering improved health benefits is also relatively expensive. With premiums expected to rise 5.5% for employers over 2018, many businesses are already contending with a stretched healthcare budget.
Side tip: If you love the thought of improving health benefits, but just don’t have the budget, consider implementing health initiatives. Incentivize employees to adopt healthier lifestyles or achieve fitness goals. This tactic can help cut down on healthcare costs by improving health.
Knowing there’s a raise on the horizon is a powerful incentive to remain at a company. Regular evaluations and raises ensure that there’s always something for employees to look forward to – rather than encouraging them to look elsewhere.
Naturally, raising salaries is not an inexpensive strategy. Surprisingly, it isn’t an incredibly effective long-term strategy either. A study from the University of Toronto reports that a 10% pay raise made employees only somewhat less likely to quit.
Part of this reason may be that the positive feelings associated with a raise don’t last very long.
The study found that the happiness and satisfaction generated by the thrill of a raise lasted more than a week, but still less than a month.
Consider saving salary boosts as a quick band-aid measure to prevent high-value employees from leaving until you can implement more thorough and substantial employee retention strategies.
401(k) Retirement Plan
Retirement. Second only to healthcare in importance to employees, this type of benefit is hands-down one of the best ways to incentivize employee retention.
A Willis Towers Watson study found that employees who rated their company’s defined contribution plan as being very important were 2.5x more likely to stay at their current job than those who didn’t.
There is a major caveat to 401(k) retirement plans – they have to be well-run. A healthy 401(k) optimized for employee retention has high participation rates, an emphasis on accessibility, a clear and scheduled onboarding process, and access to personalized financial advisory services.
Thankfully, boosting employee retention with improvements in a 401(k) plan is one of the few strategies that isn’t prohibitively expensive. In fact, an optimized 401(k) can actually save money for your business (and your employees).
Wellness and Work-life Balance
This strategy covers a broad range of potential employee benefits and tactics like leave benefits, flexible working benefits, wellness benefits, and family benefits. Wellness and a good work-life balance are about providing your employees with the tools they need to be happy in their job (and thus much more likely to stay).
These types of initiatives can include:
- Generous leave options
- Options for remote work if possible
- Flexible working hours
- Parental leave or daycare options/incentives
- Health and fitness goal initiatives
Wellness and work-life balance initiatives help your employees live full and satisfying lives beyond their employment. They repay that satisfaction with hard work and better customer service; and of course, with their loyalty.
Stay interviews are one of the most direct and hands-on forms of employee retention in this list of strategies. Want to know what you can do to make sure you are focusing on retaining your employees? Just ask. In essence, a stay interview is a conversation between employee and manager about what makes the employee keep working for you.
Some stay-interview questions you can ask include:
- What makes you look forward to work?
- What do you like the most about working here? What do you like the least?
- What keeps you working here?
- What would tempt you to leave?
- How do you like to be recognized for good work?
- What can we do to make your job more satisfying?
- How can I be a better manager for you?
Though these meetings can be a significant investment of time, they’re also an investment in your employees, and their long-term happiness. Employees will take note. Just the act of acknowledging their opinions can make employees feel valued and help increase retention.
Related to both 401(k)s and work-life balance initiatives, financial wellness is a service that provides employees with knowledge and guidance about their unique financial wellbeing.
Naturally, one of the most common reasons for leaving a job is to obtain one with better pay. This can be mitigated by offering financial wellness and advisory services – helping the employee maximize their paycheck, plan for the future, and make complex financial decisions.
If an employee feels comfortable and confident with their financial situation, they’re more likely to stay with the company providing them with the resources to remain that way. A study by MetLife discovered that 53% of employees would be more loyal to their current employer if they were to offer financial planning, and 51% would be more likely to accept a job with a new company for that service.
Transparency and communication aren’t an official benefit plan you can implement, but they are values that you can instill in your company culture.
Open-door policies, company-wide chat, and other coordination incentives and events can help make sure that employees are heard – both by management, and by one another.
When employees feel heard, they’re more likely to voice opinions and share insights that might not otherwise have been known. They also feel more comfortable voicing concerns, admitting to gaps in knowledge, and asking for guidance – all of which helps prevent mistakes and boost productivity.
Frustration with communication breakdowns or a lack of being able to contribute will drive employees to seek a job elsewhere. Focus on retention by shifting how you communicate in the office to a more functional and social model.
Are you anxious about employees leaving? Spending too much time dealing with hiring and firing? Getting the feeling your company culture is totally lackluster? Employee retention can turn that around. If there’s one fact we want to communicate, it’s that the advantages of retention and the disadvantages of turnover are too huge to be ignored. We’ve summarized the most compelling aspects (one last time) below:
|Current: High Turnover||Alternative: High Retention|
Regardless of your industry, employee retention should be one of your business’ top priorities. You can’t expand your business overnight, conjure up a new customer base out of thin air, or rid yourself of competition – but you can mitigate all of those on a smaller scale (and help your business enormously in other ways) with increased employee retention.
How much would you business benefit from increased employee retention?