What Does Employee Retention Mean?
Just a few decades ago, working at the same company for an entire career was very common among employees. Nowadays, it is normal to change positions more frequently. The average turnover rate in the UK is 15% a year, for example. However, the average job tenure has increased in the past twenty years, growing from 7.4 years in 2000 to 8.1 in 2020. That means that employees stay with a company longer than twenty years ago.
Therefore, the statistics mentioned above show us that the length of employment is not actually declining. In fact, these studies also indicate that a high turnover actually might indicate internal problems within a company, rather than simply the unsettlement of the employee.
Why Is Employee Retention Necessary?
Frequent employee turnover costs money and resources. The termination of an employment contract costs around €19,000, according to a study run by CISS. The study assumes that for a gross salary of €1,650, the termination of the work contract is even more expensive.
When an employee hands in their notice, companies have often already acknowledged a drop in their productivity. Moreover, if the position is not immediately filled, companies incur some bridging expenses. Incidentally, the employee’s know-how and all advanced training are also gone, especially when a handover does not take place, or it is not carried out properly. According to CISS, finding a new employee costs around €4,000.
Training the new employee adds another €4,000 to the loss. In addition to this, in the beginning, new employees usually work more slowly, and more mistakes occur. This can also result in costs. The bottom line is an amount of about €19,000 or more. It goes without saying, companies that invest this lump sum in retaining their existing employees will be more successful in the long term!
Which Employee Retention Measures Can Help?
Good Employee Management
Only one-third of employees in the United Kingdom (36%) are highly committed to and enthusiastic about their workplace, and one in six employees have already resigned. The main reason for resignation is a bad company culture, followed by company benefits and career growth. That is why it is so important to have good employee management.
The first and crucial step for a pleasant working environment is an open communication culture. This includes honest feedback from both leaders and employees. Transparent communication is also the only way to deal with grievances. Leaders should learn to express appreciation toward their employees. A result of a study by the Manpower Group reports that receiving appreciation is important to over 90 per cent of surveyed employees.
Flexible Working Hours
Having a flexible working schedule is another crucial factor for employee satisfaction. Employees should be able to have a voice in scheduling their working hours. This also includes the choice between full and part-time, home office and flexitime. Another benefit employees look for in a company is a good parental-leave policy. Shared and paid parental leave is a benefit that will retain your employees for a long time.
The option of unpaid leave or a sabbatical year also gives employees freedom in their life planning. It almost sounds like a contradiction, but the freer employees are, the stronger their loyalty to their company.
Opportunities for Career Advancement
Opportunities for career development ensure that careers do not stagnate. Employees can and must keep learning and improving. It helps bolster their motivation and qualifications. By acquiring new skills, employees can then refer themselves internally for another position. Usually, those who advance internally stay longer in the company. At the same time, they serve as an inspiration to other employees. Some companies, therefore, offer career goals programs and career advancements.
For example, Google introduced the so-called GROW model, where supervisors collaborate with employees to develop individual career advancement plans. Employees first set themselves a goal (G for goal setting). Then they define the current situation (R for a reality check). In the third phase, employees work out options for achieving the goal (O for options). The last phase is to define concrete steps to achieve the goal (W stands for accomplishing concrete actions).
The task of a good leader is to challenge and encourage employees in their career. Development opportunities are particularly significant to the younger generation. If these opportunities are not available in their own company, younger employees will move to companies offering growth opportunities.
Pleasant Working Environment
Ideally, employees are the best version of themselves at work. However, this only happens if the working environment is well designed. That includes, for example, ergonomic workstations and good technological equipment. Ideally, companies use employee interviews or surveys to determine what equipment employees need to do their jobs efficiently.
Of course, even if there is no need to point it out, common and rest areas, employee parking, free fruit, water and coffee are a must. After providing these benefits, the sky’s the limit. Facebook, for example, offers dry cleaning, a hairdresser, restaurants, gyms, a doctor, and much more on its campus.
Being a family-friendly company by providing a parent-child office for emergencies further increases employee loyalty. A company, of course, should also organize company dinners and parties. Company events strengthen team cohesion – and thus also employee retention.
Involving Employees in Recruiting
Another way to increase employee loyalty to the company is by involving them in the recruiting process. There are several reasons for this. Firstly, by using an employee referral program, employees can refer friends or acquaintances for open positions. By accepting their referrals, companies show that they value their employees’ opinions. In return, employees feel appreciated that the company trusts them in such an essential matter as recruiting.
At the same time, it improves the working atmosphere. This is because employees usually make referrals of friends and acquaintances who are more likely to share the company’s values. Likewise, they will refer people they would like to work with. It is recommended to offer both monetary and/or non-monetary rewards for successful referrals. This will increase employee motivation to keep providing referrals.
Incidentally, it has also been proven that referred hires stay with a company longer. Therefore, referral recruiting has direct benefits for employee retention. Employee retention of referred hires begins with onboarding because these hires will identify easier with the company’s mission and values right from the start. That’s a big plus when it comes to recruiting through referrals.
The Attractiveness of the Corporate Brand
An employee referral program strengthens employer branding as a run-off effect. Employer branding aims to establish a company as an attractive employer and, in doing so, a company can ensure that the best talent applies for their open positions.
The attractiveness of a corporate brand works in two directions. On the one hand, it unravels a good company culture by offering benefits to employees so that they stay for the long term.
On the other hand, a company can promote its branding with an employee referral program to attract qualified talent. And this is a big advantage in terms of competitiveness when hiring the best talents on the job market.
- Accurately addressing the target group.
- Authenticity in creating job ads that reflect the company’s brand.
- Clearly communicating the company’s mission and values.
Employee Retention Preserves Corporate Knowledge and Know-How
Retaining employees in the long term not only saves costs but also preserves the company’s knowledge. It is known that the skills and experience of long-term employees are the capital of every company. Nevertheless, the know-how is lost with a high turnover rate.
An attractive salary could be one of the reasons why employees stay for a long time within the same company. But it alone is not enough, as Deloitte’s study shows. Sixty-four per cent of millennials consider a positive working atmosphere as a must-have. Additionally, 58% see hybrid-remote work models and flexible working hours as a decisive point in their choice of employer. Around half of them would like to set goals for career advancement.
Hence, it pays to invest in these measures and raise competitiveness in the long term. After all, employee loyalty stands as a shield against a shortage of skilled workers. As management Peter Ducker once said, “The best way to predict the future is to create it.”