Businesses are not just about creating and keeping customers. It’s also about keeping the employees. If your company will just be about profit, having a high turnover rate can be the consequence.
Employees power your organization and without them, your organization can cease to function. This is where employee retention comes in. It’s crucial to know what is employee retention.
Employee retention is your company’s ability in keeping workers. Losing employees might not seem like a huge problem because they can be replaced. However, studies have shown that employee exit and replacing employees is expensive.
In fact, according to Employee Benefit News, the average cost for an employee leaving is 33% of their annual income.
Replacing employees isn’t that simple as well. How long do you think does a job stay vacant until the employee is replaced? According to Deloitte, it takes around 70 days for production workers and 94 days for specialized workers like doctors and engineers.
Again, you are not saving money but losing money when there are vacant positions. Moreover, other employees will share the responsibilities of the employee that left. This can have a negative effect on their productivity.
Most often, employee retention is represented as a percentage. For example, if an organization has an annual retention rate of 75%, this means that the organization was able to keep 75% of its employees and lost 25% during that year.
Retention rates are different depending on the type of industry or nature of the business. Industries such as staffing, cleaning professionals and logistics have high turnover rates.Turnover rates is the opposite of employee retention.
According to Criteria, “turnover rate refers to the percentage of employees leaving a company within a certain period of time.” Turnover rate, much like employee retention, are also costing companies.
A study by PeopleKeep concluded that turnover costs anywhere around 16% to 213% of an employee’s annual salary depending on position. According to GrowthForce, the cost of replacing a supervisor position costs even more than an entry-level employee.
If you know the factors that contribute to employee retention, you can better know how to keep your employees to make your organization grow and thrive. Here are some of the factors that contribute to employee retention.
Factors That Contribute to Employee Retention
Having a positive company culture is key if you want to have a high employee retention rate. Studies have shown that money is not the main reason why employees leave or stay at their jobs, there are other things about work that employees value more.
A study conducted by Hays showed that 47% of individuals consider company culture as their main reason for looking for a new job. Company culture is linked to employee happiness.
If employees are happier or are more engaged at work, they do not just become more committed but they also become more productive and the quality of their performance improves.
According to the Social Market Foundation, workers that are happy are 20% more productive. In turn, the organization becomes more profitable because of more productive employees.
According to a Gallup study, an engaged workforce is 21% more profitable. Moreover, company culture also contributes to the well-being of the workers. If workers not do not just enjoy their work but are also less stressed, they also become healthier.
According to David Hamiltion, happy employees have better immune system. These are other benefits of having a strong and positive company culture:
- Better teamwork among employees
- More loyal and committed workforce
- Workers take less sick days
- Less absenteeism
- Less presenteeism
- Improved customer ratings
- Improved sales
According to Gallup, highly engaged companies have 59% reduction in turnover rates. If your organization needs to improve on its employee retention, you can begin with fostering a positive company culture.
If you feel your employees are stressed at work. It’s important to address it. Dealing with stress is something not all employees are good at. Trying to develop a positive company culture is difficult if workers are stressed.
There are different types of company cultures. We made an article about the four types of organizational culture that you might want to read if you want to know more about the topic.
Employee benefits is another key factor that workers value over money. According to Glassdoor, a whopping 90% of millennials preferred employee benefits over a higher salary. It is important to know and provide the employee benefits that workers need and want if you want to attract and keep your employees.
People are smarter now than ever. According to Business Insider, “millenials are the smartest, richest, and potentially longest living generation of all time”. They are aware that they will be dedicating one-third of their lives working.
Another is that they know that they do have a choice. The choice to find and have a job that fulfills their happiness, well-being and offers them work/life balance. We mention millennials because right now, they are dominating the workforce population.
It is estimated by the Pew Research Center that by 2025, 75% of the global workforce population will be millennials.
Here are statistics about employee benefits in relation to employee retention that you should know:
- 78% of employees stay would stay with their employer because of the benefits offered – WTW
- 60% of employees would go for a lower paying job with better employee benefits. – Zenefits
Moreover, like company culture, employee benefits is also linked to improved:
Knowing what is employee retention and the factors that contribute to it can transform your business if you apply the knowledge. Company culture and employee benefits are two crucial factors that contribute to employee retention. They are also keys on how to attract the best candidates.
If you want to know more about recruitment and employee retention, we’ve written articles about the “5 Competitive Recruitment Secrets that are Effective” and the “4 Things Every Recruitment Managers Need to Know”.
We hope you learned more about what is employee retention and the factors that contribute to it. What we shared with you are backed by science and are sure to help you improve the employee retention rate of your business.
To end this article, here’s a quote from Seth Godin, “if you treat your employees like mushrooms (keep them in the dark and regularly throw crap at them), it’s entirely likely you will get precisely the work you deserve in return”.