Staff turnover costs a business 33% of an employee’s salary. That’s big bucks — the kind of money that could be game over for an SMB. Taking a more positive view, this figure also points to huge potential savings for companies who improve employee retention. Keep talented team members on your payroll and your budget will stretch much further.
So how do you persuade employees to stick around?
An attractive salary will get people through the door. But you’ll need a mix of employee benefits, perks, and attractive company policies to keep employees engaged and boost retention rates.
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Better understanding employee retention
What is employee retention? Simply put, it’s the ability with which an organization keeps hold of talented employees.
A good employee retention rate can usually be attributed to a number of different factors. Among them are levels of pay, company culture, opportunities for progression, and workplace perks.
How to measure your employee retention rate as an SMB
Working out your employee retention rate is easier than you might think. Just follow the steps below:
- Take the number of employees you have on the last day of a given time period. Don’t include any employees hired during this period.
- Divide that figure by the number of employees you had on the first day of the given time period.
- Multiply this number by 100. This figure is your employee retention percentage.
So how does your rate compare to other businesses?
According to research, 90% is the average employee retention rate across the US. If your rate falls around this mark, and you’re confident that the 10% of employees leaving your business aren’t your highest performers, you’re doing a pretty good job.
If, however, your employee retention rate is much lower than the average, then you need to ask yourself a few questions.
Firstly, are you operating in an industry where employee retention rates are typically much lower than the average — for instance, in retail or in restaurants?
Secondly, what can you do to improve that stat and persuade your staff to stay?
Why is employee retention so important? Can’t I just recruit new staff?
So why not just accept that some of your staff will move on each year and set about finding replacements?
There are two big reasons why ignoring a low employee retention rate isn’t a good idea: time and money. Lose an employee and you have to start a recruitment process to fill their role. Recruitment is time-consuming and costly, as you likely know.
That’s why recruitment and retention have to work hand in hand. By giving equal importance to both, your business will find and hold onto the very best talent — making both processes more efficient.
The signs and struggles of low employee retention
Let’s take a look at what exactly happens when an employee moves onto another company.
Fellow team members have to pick up the slack until a replacement is found. And unless they work around the clock (which is an issue in itself) then something, somewhere, has to give.
Someone — most likely the founder or owner of an SMB — is landed with the task of recruiting a new employee. This means they take their eye off other important tasks.
Even when a new person joins the team, they’ll face a learning curve. They’ll only reach peak productivity when they fully understand the role.
It’s clear that, particularly in small teams, the loss of a team member can bring operations to a standstill. All efforts are diverted to recruiting, and then training, someone new. And this means less time spent on strategy and growth.
Recruitment costs money. You pay to place a job ad, or you pay a recruitment agency to do the legwork for you. Either way, recruitment affects your bottom line.
Add in the less obvious costs of training new team members and lost productivity and you can see how researchers arrived at that hefty 33% figure.
When such huge costs are involved, just one or two disengaged employees could pose a big problem for your company.
Can you stop employee turnover before it happens?
The answer to this question is, thankfully, yes!
You can keep tabs on staff turnover by figuring out your employee retention rate and keeping track of that rate over time. Having a handle on the stats is a great place to start.
You can also work to improve employee retention by creating a culture of engagement among current staff. Invest in the benefits, perks, and policies that keep employees motivated and happy.
Over time, the results will more than justify the investment:
- You’ll experience better employee retention, which means improved productivity and reduced costs.
- Performance and morale will improve amongst your employees.
- You’ll develop teams who are fully invested in your company’s success, which means you’ll get to where you want to go more quickly.
So now let’s take a look at what strategies you can employ to reduce staff turnover.
6 ways to improve employee retention in your SMB
Define your company culture
Why does your company do what it does? What are your company’s values?
Answering these two questions will give you a mission statement and a list of ethics that will guide life in your workplace. This forms the basis of your company culture.
Having a clearly defined company culture helps to keep all employees on the same page. When employees know what they’re working towards and what is expected of them, productivity, performance, and loyalty levels increase.
A clear company culture improves employee retention but it has a knock-on effect on recruitment, too. When you understand your culture, you’re better able to find candidates who are likely to thrive (and ultimately go the distance) within your workplace.
Do your research
Keep an eye on job advertisements related to your industry. Here you’ll get insight into what your competitors are offering in the way of benefits, perks, and paychecks.
You don’t have to match your competitors like for like. But knowing what your employees can find elsewhere will help you put together an appealing package.
Also, be sure to conduct exit interviews for anyone leaving your company. Encourage an honest dialogue about their reasons for moving on — you may discover areas you can focus on in your efforts to improve employee retention.
Provide professional training
Udemy found that 42% of employees say learning and development opportunities are their second-most important consideration (after pay) when deciding where to work.
According to LinkedIn, an incredible 94% of employees said they would stay at a company for longer if it invested in their career development.
The learning? Offer your employees ongoing training opportunities and they widen their skillset. That way, they’ll feel challenged and excited by their work, and they’ll get the chance to take on new responsibilities. All of this helps to improve employee retention.
Staff training also gives your company the edge, improving performance across the board and keeping you ahead of the competition.
Offer clear opportunities for progression
Another reason people leave a job? They find a promotion elsewhere. Lack of progression would lead 82% of employees to leave their current company, according to a CareerAddict study.
To offer the right progression opportunities for your team, you need to understand their career goals. Arrange regular one-to-ones to find out:
- Where do they want to go with their career?
- What timescale do they have in mind?
- What new skills do they want to develop?
Take this information on board and tailor development opportunities for each team member. You can then offer new responsibilities and regular pay rises, promoting from within wherever possible.
Be transparent and open
Good communication is the cornerstone of employee retention.
As already discussed, communicating your company culture and understanding employee career goals can really help you create a workplace that people want to stick with.
Try to take this further. Having an overarching culture of transparency and openness is another way to improve employee engagement.
Encourage a culture of communication and collaboration; take employee ideas and concerns on board. Your employees will feel more valued (and more loyal) as a result.
Benefits are a key way to keep employees happy and motivated.
From vacation days and recreation schemes to an offer of flexible working — there are lots of ways to pass on added bonuses to your team.
For small companies, however, the big benefits like health insurance or a great retirement plan may appear out of reach. But in reality, they aren’t. Not with a Professional Employer Organization (PEO) that MartinoWest can help you find.
A PEO can help your company offer health insurance, dental and vision coverage, and savings plans to employees — all at affordable rates. They can even help arrange those nice-to-have perks like gym memberships and bicycle schemes.
However you choose to create one, the right benefits package will contribute to your company culture. It will make employees feel valued and, as a result, improve employee retention — helping you to reduce costs and boost productivity in the process.
Contact the MartinoWest team today and let’s look after your employees together.