Recruiting top talent is always a challenge and requires a significant investment of time and money. Recently, the challenge for many businesses has been greater than ever, with acute staff shortages being experienced across nearly all sectors. Employee retention is one strategy that can help companies manage the shortages.
What is the current situation?
The latest ONS data shows that although the rapid growth in vacancies seen in the summer of 2021 has slowed significantly, the elevated numbers of vacancies, alongside low levels of unemployment, indicate a historically tight labour market. In May to July 2022, the number of unemployed people to every vacancy remained at a record low of 1.0.
Pavan Arora, Chief Commercial Officer at Cardiff-based recruitment agency Yolk Recruitment, a company that we have invested in, told us that “the number of vacancies in the UK was starting to stabilise, though still at record levels. However, there is now a huge surge in businesses that, through no fault of their own, are having to focus on replacing staff who are seeking new jobs to counter the increasing cost of living and inflation.
“Remuneration is currently the top factor attracting employees; however, there are other things a business can do to manage staff shortages. One strategy is to focus on retention. Many people who enter the employment market do so because they feel that career discussions are no longer happening in the organisation they work for. So, it’s about communication, having regular appraisals, and helping employees understand what skills they need to develop in their current role.
“We’re finding that those retention-focused conversations aren’t happening across the board. The businesses that do it really well and focus on career development are not finding the staffing situation as difficult.”
With this in mind, we’ve put together this guide on employee retention. We take a look at what employee retention exactly is and the benefits it has for businesses, before providing some key tips on how to retain employees.
Hopefully, by focusing on retention, you’ll reduce the need to go through the costly recruitment process. Not only that, but by making your business the type of place in which employees want to stay, you’ll enhance your employer brand and find it easier to attract top talent.
If you need financing for your business, whether to expand your team or for a different purpose, get in touch with us to find out more, or apply now.
What is employee retention?
Employee retention refers to all the practices and policies a company adopts in order to retain quality employees and thereby reduce unwanted employee turnover.
It’s often expressed as a percentage relating to the proportion of a workforce that stays with a company over a specific period of time.
To work out your employee retention rate, you would divide the number of employees who stayed at your business throughout a set time period by the number of employees who started on day one of that time period, and then multiply by 100.
For example, if your company has ten employees on 1 January, and eight of those employees remain the following January, your rate of employee retention for the year would be 80%.
There are many measures a business can take to improve their employee retention rate. We’ll outline some of these below – however, firstly, let’s take a closer look at why employee retention is so important for businesses.
Why is employee retention important?
Good employees make all the difference to the performance of a company. Talented, hard-working members of the team are an extremely valuable asset and can be difficult to replace.
Here are some of the main ways in which retaining employees can benefit your business.
Reduced costs
Hiring new employees can be expensive and time-consuming. There are many steps involved, including advertising the position, screening and interviewing candidates, and onboarding and training them.
Greater productivity
High employee turnover can result in lost productivity. There may initially be a time gap between an employee leaving and the onboarding of the replacement, and then it can take a while for the new employee to get used to the job and work at their most productive level.
Employees who have stayed at the business for some time, on the other hand, will likely have developed in their role and gained a deep understanding of the organisation. They might be more engaged and feel more invested in the success of the business. Also, importantly, they will be able to share their knowledge and experience with others.
Improved morale
If colleagues are frequently resigning, it can be harder to build a positive company culture, and it might have a detrimental effect on morale. Existing team members might be required to take on additional workload, which may lead to stress and dissatisfaction.
Better customer experience
If your employees are motivated and happy, then they’re more likely to want to establish a good rapport with customers and deliver excellent customer service. Experienced employees will also have the skills and knowledge necessary to solve customers’ problems. If, by contrast, your employees are always coming and going, it may be challenging to develop strong customer relationships, and it may even negatively affect how your brand is perceived externally.
All of these benefits we’ve discussed – improved customer experience, reduced hiring costs, and increased productivity – can have a significant impact on revenue, profit, and the growth of your business.
Here are some tips to help you get started on thinking about how you could improve employee retention.
1. Provide professional development opportunities
Everyone in your organisation stands to gain from a focus on learning and development. Especially now, when many employers are finding it difficult to find candidates with the right skills, it makes even more sense to provide professional development opportunities to upskill or reskill your existing employees.
And from your employees’ point of view, they are likely to feel more valued and motivated if you give them access to the learning resources they need to gain new skills and become more knowledgeable and confident at work.
Learning and development alone can go a long way in improving employee retention; however, linking it to internal progression opportunities will have even more of an impact.
Rewarding development with promotions and pay rises can significantly boost morale – and not just for the promoted employees. Having and sharing these internal success stories will highlight to other colleagues that they too can progress in the organisation.
With this in mind, it’s important to have regular and clear communication with your employees around career development. Of course, you should avoid making any promises you can’t keep, but these conversations will help you understand how they’re finding their current job and what their short, medium, and long-term goals are. You can then work together to try to develop their role in a way that also aligns with your organisation’s strategic objectives.
2. Improve the onboarding process
When you’ve spent time and money hiring a new employee, the last thing you want is to lose them in the first few months, before they’ve become their most productive. According to research by Brandon Hall Group, organisations with a strong onboarding process improve new hire retention by 82% and productivity by over 72%.
An effective onboarding process starts before the employee’s first day – this is what’s often referred to as ‘pre-boarding’. During the time between their acceptance of the job offer and their starting date, make sure you engage with them. Sending a welcome email with useful information will help to alleviate first day anxieties. You could even invite them to your office or to any social events so that they can meet their new colleagues.
It’s also a good idea to get as much of the paperwork done as possible before they begin. That way, you can focus on making them feel welcome and included in their first few days, rather than having them spend most of their time signing documents.
The onboarding process doesn’t stop after the new starter’s first week, or even their first month. To be most effective, it should last at least a few months.
There are many things you can do to make your onboarding programme successful - from setting clear expectations and providing proper training to scheduling regular check-ins. You could even assign the new employee a mentor or buddy. Essentially, though, a good onboarding process will make the employee feel valued, part of the team, and enthusiastic about the role – not overwhelmed and disengaged.
3. Promote a healthy work/life balance
Work-life balance is a vital aspect of employee retention, having a big impact on job satisfaction, as well as your employees’ overall health and wellbeing. There are lots of ways in which you can support a better work/life balance for your employees.
One way is to offer remote or hybrid work, which reduce the time and stress of commuting. Since the pandemic, the option to work remotely at least some of the time has become non-negotiable for many people, with a Robert Half survey showing that 50% of professionals working from home would look for a new job if required to return to the office full time.
Providing the option to work from home (or anywhere) will also give you access to a much wider talent pool. It’s important to recognise, however, that employee burnout can happen even when working remotely. In fact, sometimes the blurred boundaries between home and work can make people even more susceptible to burnout.
To counteract this, you could consider introducing other flexible work arrangements like flexitime. It’s also important to remember that your employees may not always speak up when they’re struggling. So, watch out for signs of stress, make time to check in with them regularly and review their workloads, encourage them to take their paid annual leave, and foster an environment where people feel they can communicate openly.
If you’re interested in learning more about different flexible working approaches and some of the key considerations for businesses, check out this article from Yolk Recruitment on flexible working in 2022.
4. Develop and review your benefits package
Having your employees’ needs in mind when thinking about the benefits you offer will help you to create a truly attractive and well-rounded benefits package. Look at your workforce as a whole and try to make sure you’re providing something of value to everyone.
The most effective way of understanding what your employees really want is by getting feedback. Find out which benefits they are and aren’t using already and what their priorities are.
It’s important to be aware, of course, that benefits packages can be expensive, and the costs will rise as your business grows, so make sure you plan it out financially. But generally, developing a good benefits package is a worthwhile investment, helping you to attract and retain talented staff. There are also benefits you can provide that come at little or no cost to you, like a relaxed dress code, yoga classes, or flexible work timings.
Once you’ve built your benefits package, don’t forget to communicate it so that your employees are fully aware of what’s available to them. And, last but not least, regularly review your benefits to ensure that they remain relevant and attractive to your employees.
To learn more, read this article from Yolk Recruitment on revamping your benefits package, which includes a summary of the benefits they offer as an organisation.
If you want to find out how another real-life business has successfully implemented employee retention strategies, then check out our employee retention case study.
