For any organization, retaining top talent is a crucial aspect of being able to grow. Since 2021, the ongoing trend of employees voluntarily leaving their jobs has been termed the Great Resignation or the Big Quit, a direct repercussion of the global pandemic of COVID-19.
Suddenly, companies of all sizes are determined to reverse the odds by improving their employee retention rate across departments. Companies are more focused on effective referral programs, rewards, and recognitions.
The top brass and, indeed, the people in business understand that retaining top talent isn’t just about the salary you pay people. Employees' professional needs have to be met, and those needs and demands are increasing.
In this post, we outline effective strategies on how to improve your employee retention rate.
Organizations of all sizes can capitalize on these proven methods to engage and retain employees in the long term to work better.
Thereby, they can reduce employee turnover rates and costs and improve the overall morale of their workforce.
What is employee retention?
Employee retention is the process of keeping employees engaged and committed to their jobs and your company. It’s a key part of organizational success, and it starts with creating a positive work environment that meets employees’ needs.
Why do employees leave?
There are many reasons why employees might leave your company, but some of the most common include:
-Compensation: If employees don’t feel like they are being paid enough, they will look for other opportunities.
-Benefits: If your benefits package is not competitive, employees will look elsewhere.
-Work/life balance: If your employees feel like they are working too much and not having enough time for their personal lives, they will look for a company with a better work/life balance.
-Development opportunities: If employees don’t see any opportunities for growth or development at your company, they will look elsewhere.
- company culture: If your company culture is not a good fit for an employee, they will look for a company that is a better match.
What is employee retention rate?
Employee retention rate refers to the rate at which employees stay at your organization over a clearly defined period. Employee retention determines the total number of employees an organization manages to retain without losing them to competition and other reasons during a certain period.
The higher your organization’s employee retention rate, the better your chances of reaching your business goals on time. It means you have the required workers to carry out operations smoothly and uninterruptedly.
By evaluating the factors influencing employee morale and gathering continuous feedback from your people, you can incorporate a strategy to ensure that they are on board for the long term.
The importance of employee retention rate
Retaining valuable employees is essential. Ensuring a low turnover rate will ensure that you have better control over the business and its functions.
Maintaining a high employee retention rate is important because it helps organizations realize how their business matches up to the expectations of top talent. You will understand how to improve your employee experiences and incorporate policies that make working at your organization extraordinary.
If you have a low retention rate, your business is likely to lose a lot of money hiring new workers to fill gaps in the organization. A low retention rate prevents business leaders from investing in the existing talent, being unable to equip the workers with resources to upskill and grow within the organization.
According to Gallup, the cost of replacing employees can be anywhere between .5 and 2x times the annual salary of an employee.
Besides the cost savings enabled by a high employee retention rate, there are some other benefits that showcase its importance:
- Improved recruitment processes are directly tied to the initiatives taken to retain and engage employees at an organization.
- Companies that implement retention strategies to manage attrition rates are more likely to attract top talent.
- Employee engagement activities help improve productivity and boost team collaboration.
- People who enjoy working at your organization are likely to stay and refer your workplace to others in the industry.
How to calculate employee retention rate?
To calculate your employee retention rate, follow the 4-step process outlined below:
Step 1: Define your time period for calculation
Usually, employee retention is calculated over an annual period. However, you can measure the retention rate for specific time periods, such as splitting the year into quarterly evaluations.
Company X wants to identify the annual employee retention rate for FY 2020-2021.
Time period: January 1, 2020 to January 1, 2021
Step 2: Specify the number of employees at the start
Use your payroll data to check the number of employees you had at the beginning of the selected time period.
Employees Engaged (EE) as of January 1, 2020 = 150
Step 3: Determine the number of employees retained
Remove the employees that were hired during that period from the total number.
(Last day headcount) - (new hires) = retention number
If you had 150 employees on the first day of calculation and hired 25 over the course of the year, this is the number of retained employees:
150 - 25 = 125 employees retained
Step 4: Calculate your total employee retention rate
Calculating the employee retention rate is an easy formula:
[(Total employees on the last day of a set time period) / (Total employees on the first day of a set period)] x 100 = Employee retention rate
Company X retained 125 employees on the last day out of 150 employees at the start of day 1 of the calculation.
125/150 = 0.83
0.83 x 100 = 83% is the employee retention rate for company X.
5 ways to boost employee retention
Now that you know how to calculate the employee retention rate, and understand the importance of long-term employee engagement, let’s look at five ways to boost employee retention at your organization:
1. While recruiting, identify candidates who will match your workplace dynamics
Recognizing retention begins with the recruiting process, so highlight the aspects of your workplace that you want to find in recruits. Identify candidates who match the persona you’re looking for because they’re likely to stay the course.
2. Provide ongoing education and training opportunities for career development
Create a culture of learning and continuous upskilling, offering employees access to the technology and resources to grow as individuals and professionals. This type of employee engagement helps in numerous ways, from upskilling your workforce and generating a sense of commitment to collective growth.
3. Leverage remote and hybrid work options
Amidst the digital disruption, it is evident that workplace preferences and work styles are changing. People would rather spend 9 hours working from home than traveling through traffic for 2 hours a day and then working 9-hour shifts.
Keep the remote work and hybrid options open to your employees to highlight the flexibility enabling work-life balance encouraged by the company.
4. Offer competitive compensation packages and incentives
One way to ensure employees don’t leave is to make sure that you are at least paying them by industry standards. Again, this is not enough. You have to give them an attractive benefits package too. Create a performance-driven culture and reward high performers with incentives based on the results they generate for your company. You can also offer multiple ways for employees to participate and earn more with the work they do for you.
5. Engage your workers
Empower your employees with the technologies and tools to do smart work without wasting any time. Create events and programs to keep the workforce engaged. Recognize the efforts of your people, highlight their contribution, and ensure ample opportunity for employee development.
6. Effective Communication:
Employees need to feel like they are in the loop when it comes to company decisions. They should feel like their voices are being heard and that their input is valued.
7. Recognition and appreciation:
Employees need to feel like their hard work is being noticed and appreciated. This can be done through things like verbal praise, awards, and bonuses
8. Continuous feedback:
Employees need regular feedback in order to feel like they are on the right track. This doesn’t mean nitpicking every little thing, but it does mean offering constructive criticism and letting employees know when they are doing a good job.
If you keep your employees happy with effective retention strategies, your organization will find new opportunities to grow and attract top talent. Retaining talent is crucial for the success of your business, and you can leverage digital disruption to do so.
Check out our post-pandemic e-Book guide to deliver an exceptional employee experience in the new normal.