In the current labour market it is vitally important that an employer understands how to retain staff. Statistics on employee retention and turnover rates vary by source and by sector, Monster gives the average employee turnover rate as approximately 15%. Based on figures from their own survey of over 500 employers the employee culture and wellbeing website Make A Difference gives the average employee turnover rate for 2022 as 33.6%, with an estimated figure of 35.6% for 2023. Even if we split the difference of the two and go with an average turnover rate of 25% that means that an employer is losing a good number of employees each year and that has an impact on their business in a number of ways.
What is the impact of employee turnover?
Employee turnover can have a detrimental impact on a company for numerous reasons. First and foremost recruiting staff is costly and the more leavers you have, the more new hires you’ll need and the more money that will cost you. A report entitled The Cost of Brain Drain by Oxford Economics found that the average financial impact of staff turnover of an employee earning £25,000 per year or more was £30,614. That figure factors in the cost of lost output and productivity that an organisation would have received from the employee who has left, as well as the costs associated with recruiting a replacement and the time investment in the recruitment and induction process. In addition to the costs, high employee turnover can be harmful for the morale of your team as there is often a reliance, even if it is temporary, on staff to pick up work and cover for a leaver. This can leave staff feeling like they are being taken advantage of and that they are doing more work than they are paid for which could ultimately lead to grievance situations if not handled correctly. A constant churn of staff can equally impact on your clients and customers as there is a lack of continuity of service. New employees take time to bed in and learn the ropes and so they may not be as informed or as informative as previous employees. When an employee gets a reputation for high turnover that can also have a knock on effect on their recruitment as people tend to look for employment with an employee who offers more stability.
How can you improve retention?
Realistically what can employers do though to improve retention? According to a BBC News post, which quotes research by the CIPD, nearly 40% of UK employers have made counteroffers to staff who have been offered a new job elsewhere in the last 12 months. Of those making counteroffers 38% have matched the salary offer of the prospective new employer, whilst 40% have offered a higher salary. Simple throwing money at retention though isn’t an affordable or sustainable strategy. If an employer has high staff turnover then it is likely that there are some core issues which are creating these retention problems. Making counteroffers isn’t going to solve those problems and employers would therefore be better off investing money to address the root cause rather than just spending it in a reactionary way to put a sticking plaster over the problem.
Employers should look to be proactive when it comes to retention so that they have a clear, consistent strategy, there isn’t a one size fits all method to retention but employers should consider the following approaches:
- Induction & Onboarding – First impressions count, if a company sets the right tone with a new starter and gives them a welcoming, informative and engaging induction and onboarding experience then they will build buy in and loyalty from the outset. If employees have a sense of purpose and belonging at work then they are less likely to look elsewhere.
- Pay & Reward – The impact of the cost of living crisis has affected us all and employers have had to balance rising business costs with wanting to support staff by offering pay increases when possible. It is important for a business to understand how staff like to be rewarded as not everything will cost money. Employers could increase annual leave entitlement, partner with benefits platforms to offer discounts or give one off pay awards if affordable. Companies can and do spend money on benefits that staff simply don’t want or use so research and consultation is important.
- Wellbeing – Employers should think about how they look after staff and their physical, mental and financial wellbeing, they should find out what issues are keeping their employees awake at night and offer support and interventions if possible. Again this builds a sense that the employer cares and that increases loyalty.
- Communication – Connecting with employees has always been important but with the increase in remote working, employers need to make sure that staff are engaged, that key messages are delivered and that they have an opportunity to have regular discussions about how they are feeling and receive feedback about their work. The risk if businesses don’t communicate effectively is that employees feel like they are out of the loop, perhaps they aren’t being told the full story, or any story, and that then breeds rumour, distrust, disinterest and negativity which then increases the likelihood of retention issues.
- Training & Development – Training and development doesn’t have to cost much, if anything, but when employees can see a clear career pathway and opportunities to grow professionally and personally they are more likely to be engaged and stay with their employer.
- Flexibility – The pandemic brought flexible working into sharp focus and for many employees a flexible approach to how, where and when they work has now become the norm. Employers should look at what staff want, how that can be married with the needs of the employer’s working arrangements and then employers should try their best to offer some degree of flexibility that promotes a positive work-life balance. Again this creates engagement and if there is give and take from an employer and a willingness to be accommodating then employees will pay that back in their work ethic and productivity.
The issue of employee retention looks set to continue to be a key consideration for many employers in the months ahead. Employers must give time and thought to retaining their staff as the uncertainty, upheaval and costs associated with high turnover can easily be the difference between a business succeeding or failing.
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Why not also check out our blog on a similar topic Top 10 Employee Retention Strategies
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