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Recruiting and retaining staff is expensive and time-consuming, and a high staff turnover can cause a domino effect of negative impacts across revenue, productivity, company culture, reputation and more.
It’s no secret that filling roles and building well-established teams has become increasingly difficult for leaders in the last few years. Throw in a pandemic, a cost of living crisis and competitive salaries, and the need for effective retention strategies has become more prevalent.
Employee retention refers to a company’s ability to keep its employees. While people may leave their jobs for a number of reasons, there are strategies and practices that can be utilised to prevent top talent from leaving and improve your employee retention rate.
As reported in February 2022, the Australian Bureau of Statistics found that 1.3 million Australians quit their jobs in the year prior, equating to 9.5% of employed people and the highest rate recorded since 2012. Young people especially are switching jobs with more regularity, with 50% of millennials likely to look for a new job in the next 12 months.
An employee retention rate is measured by the percentage of employees that stay with a company within a measured time period. Rates vary by industry, so applying your own metrics and collecting YOY data will provide the best insights for your business. Our HR consultants are here to help you understand the value of retaining your employees.
Why Is Employee Retention Important?
The cost of employee turnover is high, and companies will certainly pay the price if they fail to prioritise employee retention. According to the Australian HR Institute, the cost of replacing an employee can be as much as 150% of their annual salary.
Employers that do not track the cost of turnover often take a hit in profitability, which goes unnoticed. Not to mention the time and effort taken to recruit, onboard and train a new employee and the stress that amounts from constant replacements.
The Benefits Of Employee Retention
Having a good employee retention rate isn’t just about keeping one particular employee or minimising the effects of someone leaving. It can also improve company performance across a number of key metrics and provide the following benefits:
Investing in effective employee retention strategies will reduce your costs in the long run. Recruiting and training new hires is expensive and time-consuming, especially when coupled with the separation costs and stress of a departing employee. There’s also the potential for revenue to decline at the hands of inexperienced staff members.
With a successful retention strategy in place, employees are enabled to create greater connectedness and engagement in the workplace. The positivity and happiness of long-standing employees are contagious to other team members and can help boost morale.
The longer employees stay, the longer they have to develop their knowledge, skills and relationships. Over time, top performers gain the ability to understand organisational nuances and become capable of solving complex issues on their own – providing more value for the company than when they first started.
On average, it can take a new hire one to two years to reach the productivity of an existing employee. After all, an existing employee has had time to develop their abilities and relationships. Not to mention a well-staffed environment without vacancies helps to prevent employee burnout, low-quality work and delays.
Recruitment and training efficiency
Replacing a role every year for three years would require recruiting three times, onboarding three times, and training three times. But what if the same person stayed in that role for three years? And that’s just a small-scale example. Successful employee retention will decrease the time spent on recruiting and training, allowing more time for investing in strategic initiatives that improve the employee experience.
Better workplace culture and engagement
When somebody talks about leaving a company or submits their resignation, it's only natural for their colleagues to wonder why and perhaps even question their own position. But employees that are engaged and align with a company’s work culture stay and strengthen the organisation’s ethos. Long-standing employees continue to work for the company as they feel connected to their work, their team and the business environment overall.
Increased revenue and ROI
Successful employee retention can result in significant revenue gains. Not just from the costs reduced from recruiting but the increase in productivity and job satisfaction.
How HR Can Influence Improved Retention
A good HR strategy can support employee retention across several key factors. Being aware of how each of these strategies contributes to employee retention can help you to influence change within your organisation.
Recruitment and onboarding
A poor employee retention rate can often be attributed to bad hiring decisions. New hires should not only fit the role responsibilities and skills required but also be a good fit culturally. Clearly outline your expectations for the role and provide adequate guidance during onboarding to empower them to work autonomously and thrive.
A strong employee value proposition
An employee value proposition or EVP will not only help you to attract top talent but is also key to retaining it. By providing and communicating the benefits of working for your company, employees are clear on how their good work is being rewarded.
Employees are more likely to stay with an organisation when there is a robust performance management framework in place. Having ongoing communication with their manager about how their role contributes to the company’s objectives and an open line of feedback allows them to feel supported. Communication about performance should be consistent (both formally and informally) to be effective, as well as by way of performance appraisals.
Career progression and growth
One of the key ways to improve employee engagement is by providing a clear pathway for career progression and growth. After all, if employees feel they’ve outgrown their position and there are no internal opportunities, they’re bound to look elsewhere.
For further strategies to help improve your employee retention, enquire about our outsourced HR today. Our team of employee retention consultants can provide the guidance and expertise you need to put a people plan in motion.