What Does Employee Turnover and Employee Retention Mean?
Employee retention and employee turnover are two sides of the same coin. Employee turnover is the amount of people who leave your business. If you’re trying to calculate your annual employee turnover it would look a little something like this:
Employee turnover rates can differ largely by industry, but the average for all companies is 18% of its workforce.
Employee retention meanwhile is the rate at which a company retains its workforce. Whether they’re labelled as “employee retention” or not, every company will have systems and policies in place that are designed with employee retention in mind. These will be incentives, benefits, or company policies that are designed to make your employees want to stay at your business.
Why is Employee Retention So Important?
Employee retention is so important, because employee turnover is such a massive financial and operational detriment to your business.
It’s difficult to put an exact figure on how much it costs to replace an employee. Oxford Economics puts the cost of replacing an employee earning over £25,000 a year at £30,614. But taking into account lost revenue and opportunities to grow the business, is different for every business.
You may have to turn down new clients for your business, because your existing team simply can’t handle the workload. Or you may end up with other members of the team following the person out of the door, when they suddenly have extra work now piled on their own desk.
Which is to say nothing of the cost of recruiting a new person to replace them, or the cost of time that you need to invest to find them. But recruitment costs aren’t the only reasons that employee retention is so important. It has benefits in plenty of other areas that can influence your business.
What are the Benefits of Improving Employee Retention For Your Business?
Having a strong employee retention plan and strategy has plenty of benefits for your employees and your business:
- You spend less on recruitment: Recruitment can cost tens of thousands for those hard to replace employees: Which says nothing of the cost to the business of your time, finding and interviewing that replacement.
- Your clients will receive a higher level of service: If you’re a business that has long-standing partnerships with clients, having a revolving door of employees who they work with will have an impact on your business’s relationship with them. They will want to see the same person again and again, and having consecutive employees leave over the course of your partnership won’t reflect well.
- The training you provide will be better for the business: One of the main reasons for offering training to your employees is to receive a return on the investment of time and money. And the longer your employees stay at the business, the better.
- Employees who stay longer are happier. And happier employees are more productive: When employees stay longer, it’s because they are happy in their work and in their jobs. And happiness can improve productivity by over 20%!
- Employees who stay longer, are more valuable: Employees become increasingly valuable over time to the business. Because while you may have two people working at the same level with similar salaries, the person who has been with the company for 1 year won’t be as valuable as the employee who has been there 10 years.
What are the Causes of High Employee Turnover?
The first steps to improving employee retention is to understand the reasons that can cause your employee to leave in the first place. Here at Dynamic we speak to candidates every day, and the reasons we hear that they’re looking for a job are always the same, and they’re always preventable:
- Not enough salary growth: The biggest reason people look for a new job is salary. With the rising cost-of-everything, salary has never been more important. And if you’re not offering regular salary increases to your employees, someone else will!
- Personal reasons: Sometimes, someone leaving is just out of your control. They could be relocating, moving into a different industry, or leaving for health reasons. Unfortunately, there is often nothing you can do to prevent this person from leaving.
- Bad Managers: There’s a common saying, ‘no one ever quits a job, they quit a manager’. Having poor leaders and managers in positions of power can have long term negative impacts on your employee retention efforts.
- No opportunities for career progression: A lot of the candidates we speak with feel they have to move companies to progress in their career. And if your employees are feeling the same way, you’ll be losing some of the most valuable, eager to progress, members of your team.
- No opportunities to learn new technology: Working with the newest and latest technology is a huge benefit to an employee’s career. And if you’re not offering those opportunities, your employees may not want to risk falling behind their peers.
- Feeling overworked: If your employees are feeling overworked or underappreciated, they might start looking for greener pastures. And this can have a compounding effect, as the team that are left now have even more work to cover, and can have negative employee attrition impacts.
How Can You Improve Employee Retention?
For every one of those reasons for high employee turnover, there are steps you can take to address these problems and improve your employee retention.
Give employees a tailored career progression plan
Being upfront with employees about the steps they need to take to progress in their career. This gives them attainable goals to hit and strive for, rather than just some vague notion of “you’ll be promoted when you earn it”.
Employee recognition
Something that isn’t too costly, is recognising the hard work of your team. What form this actually takes can vary massively, from team social events, to financial incentives. But what’s important is a genuine recognition of the hard work your employees put in every day.
Supporting a work-life balance
If your team is feeling overworked, they’ll vote with their feet. So it can often fall on you as the employer to ensure that your team feels supported to have a genuine work-life balance. This can mean managing your employees workloads or having regular conversations about how they feel about their work schedules.
A strong company culture
Company culture isn’t something you necessarily think of when you think of ways to combat employee turnover. But it absolutely should! Having a strong company culture where your employees feel like part of a team and enjoy their time at work can reduce employee turnover by up to 35%!
Regular meetings about salary and raises
Having annual or bi-annual salary reviews can help to prevent employees feeling forgotten about. Even if there is no pay rise, having this conversation helps prevent wage stagnation and helps employees feel recognised.
A structured onboarding process for your team
Employee retention starts right at the beginning, with the onboarding process. Helping your new hires fit right in from the start and establish relationships with the team, helps them feel like a part of the team. In fact, a good onboarding process can have your employees feeling up to 18x more committed to the workplace!
Offering flexible working
Not every job or position can offer hybrid, remote, or flexible working. But if you are in the position where you can reasonably offer this to employees, then it can improve employee retention significantly. The results of our very own LinkedIn poll show how in demand it is right now…
Measuring Your Employee Retention and Employee Turnover
Depending on the size and scale of your business, you may already have data on employee retention. And while it takes some effort, noticing these trends and patterns in your employee turnover can help to identify areas of weakness in your business.
And a crucial element to this is proper exit interviews. When your employees do leave, have an open and honest exit interview. Ask about why they are leaving and things you could have done to prevent it, and you’ll have all the insight you’ll need to prevent others following them out the door for the same reason.
In Summary
Tips like these can have far-reaching, positive impacts on your employee retention efforts. Improving employee happiness, productivity, and improving your business financially.
But despite all the efforts in the world, sometimes your employees leave, and there’s nothing you can do. Or you may be just looking to expand your team over time, due to new client successes or business growth. Those are the times when you need a talent acquisition specialist and recruitment partner like us here at Dynamic Search.