In a world where more and more professionals are taking their skills to the gig economy, employee retention strategies have become more critical than ever before. Not only do employee retention strategies help companies keep talented team members on board, these employee retention techniques also help employers keep turnover costs down.
Studies have found that every time a salaried employee is replaced, it costs the business an average of six to nine months’ worth of that employee’s salary.
The good news is that there are low-cost strategies for employee retention you can put to work today to boost your employee retention rate and help keep more team members around for the long haul.
What is employee retention?
Before we get into specific employee retention strategies, let’s talk about what employee retention is and why it’s so important. Employee retention refers both to the ability of a business or organization to retain its employees and to the strategies and techniques by which the company seeks to retain them.
Employee retention is typically expressed as a percentage, called the employee retention rate. For example, a 90% retention rate means that the organization kept 90% of its employees within a specified time period.
Of course, it’s near impossible for any organization to achieve a 100% employee retention rate. Employee turnover happens for many different reasons, and some industries inherently experience higher turnover rates than others.
Why is employee retention important?
Employee retention is important for a few key reasons. First, while onboarding new employees is necessary for growth, constantly having to train new employees due to an unnecessarily high employee turnover rate becomes inefficient and burdensome at a certain point.
It’s also important to retain experienced and knowledgeable team members to ensure their skill and know-how stays with you. Long-term employees have a wealth of experience that you simply can’t replace with a new hire, so it pays to make sure they want to stick around and help pass that knowledge on to up and coming employees.
Employee retention is also important for keeping morale up among the ranks. A high turnover rate may leave other employees questioning their own futures with the company. It may also leave them picking up the slack left behind by those who are offboarding.
Finally, a good employee retention rate is important for the bottom line. According to the Work Institute’s 2020 Retention Report, voluntary turnover costs in 2019 exceeded $630 billion for U.S. companies. Those costs include the cost of termination; the cost of replacement; the vacancy cost, which is found by multiplying the number of days the job is open by the average value of the job per day; and the loss of productivity due to time spent getting a new hire up to standard performance.
How do you determine your employee retention rate?
Just like any other business metric, your employee retention rate can give you insight into the health of your company as it relates to keeping valuable team members on board. So, how do you find your employee retention rate?
Calculating employee retention is a straightforward formula: simply divide the number of employees you have at the beginning of a period by the number of employees at the end of that period. This will give you your employee retention rate expressed as a percentage.
For example, say you are measuring your employee retention rate for the first quarter. You started the quarter with 120 employees, and you ended it with 108. You’d calculate your employee retention rate as follows:
108 / 120 = 0.9 = 90%
In this case, your company managed a 90% employee retention rate for Q1.
What are retention strategies and employee retention techniques?
Let’s look now at some employee retention strategies you can use to help increase your organization’s employee retention rate.
- Competitive compensation
First and foremost, you can’t expect to retain valuable employees if you aren’t offering competitive salaries and benefits packages. The labor market is fierce, especially for top talent, and core benefits like health insurance, paid vacation, and retirement plans should at least be in line with comparable companies in your industry.
Outside of competitive wages and benefits, perks go a long way in keeping employees happy. These can include the option to work remotely or other flexible scheduling options. Even seemingly small things like a refrigerator stocked with beverages and the occasional catered meal can have an impact on company culture.
- Mentorship programs
An employee mentorship program is one of the most powerful employee retention techniques outside of compensation itself. In fact, one survey found that 91% of employees who have a mentor say they are satisfied with their jobs. What’s more, workers who have a mentor are 10% more likely to say they’re well paid than workers who don’t. They’re also 14% more inclined to say that their contributions are valued.
On the other hand, “more than four in 10 workers who don’t have a mentor say they’ve considered quitting their job in the past three months,” the survey found.
- Wellness programs or offerings
While a wellness program is technically a perk, it’s an important one that deserves its own spot on the list. Fit and healthy employees are not only happier, they’re more productive, too.
One survey found that 26% of employees who participate in a wellness program miss fewer days of work. Additionally, 40% say they are “encouraged to work harder and perform better” as a result of a wellness program.
One of the simplest things you can do to foster positive relationships and make employees feel valued is to keep communication open and honest. Employees should feel they can come to their supervisors and managers to express ideas, concerns, or to ask questions. They also expect to receive honest feedback on their performance and improvements they can make.
- Recognition and reward systems
Along with communicating with your employees consistently, recognizing and rewarding them when they go above and beyond is a way to genuinely show appreciation and incentivize workers to want to continue giving their all. Nothing will turn up turnover rates faster than hard work that’s unrecognized.
Employee recognition platforms like Bonusly are a great way to allow employees to feel valued and recognize one another for their workplace contributions.
Low-cost strategies for employee retention
Here are a few low-cost strategies for employee retention that will help you keep your team members happy on a budget.
- Recruiting the right candidates
Retention begins with recruiting. That means identifying the qualities and characteristics you value most and searching for candidates that reflect those traits.
- Communicating frequently
It costs nothing to keep lines of communication open, but it does go a long way in maintaining a positive culture in which workers are happy to stay.
- Fostering healthy work-life balance
According to a Harvard Business School survey, 94% of professionals reported working more than 50 hours every week, while almost half worked more than 65 hours. That’s simply not conducive to a healthy work-life balance. Prioritizing personal time outside of work is a cost-effective way of preventing employee burnout and improving retention.