Employee Retention Strategies

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Employee retention is an important part of running a successful organisation, where the costs associated with high employee turnover rates can be significant, from temporary staff cover to recruitment and training costs, not to mention the loss of valuable talent. The ability to retain valued members of staff has become highly preferable in light of ongoing shortages in skills and labour across all areas of the economy in the UK, and globally.

In this guide to employee retention strategies, we look at various different practical ways in which employers can help to drive employee job satisfaction and increase employee engagement, in this way helping to increase staff loyalty in the long term.

 

What is employee retention?

Employee retention is the ability of an organisation to retain its employees so as to ensure the sustainability of its workforce and effective operational performance. There are various methods for measuring employee retention rates but, in broad terms, this can be measured as the proportion of staff with a specific length of service, say a year or more, expressed as a percentage of workforce numbers. In contrast, employee turnover refers to the proportion of employees leaving an organisation, again expressed as a percentage of the total workforce on say a year-on-year basis.

The expression ‘employee turnover’ is typically used to cover all leavers, including those who retire or leave involuntarily, either due to dismissal or redundancy. However, it can be useful to analyse this data in more detail, to help determine the number of resignations. It is this statistic that is likely to be the most useful when assessing the effectiveness of people management practices, as well as informing the design of targeted employee retention strategies if more needs to be done to help keep the workforce happy.

In particular, for businesses with high resignation rates over the course of the last year, employers should be looking to immediately implement a number of initiatives to help reduce employee turnover rates and, in turn, increase employee retention rates.

 

Why does employee retention matter?

Employees are arguably the most valuable asset that a business has, where the cost of losing staff can be significant, especially in the context of the current climate of labour and skills shortages. High employee turnover rates can also become an operational challenge for employers unable to secure replacement staff in a competitive job market. The various practical and costs consequences arising from poor employee retention, can include:

  • the cost of temporary cover where employees leave without notice or employers experience problems recruiting a suitable replacement
  • the cost of recruitment, onboarding and training a suitable replacement
  • the loss of valuable talent and organisational knowledge
  • the inevitable disruption to daily operations and business continuity
  • low productivity for leavers working out their notice, as well as low productivity of replacement recruits getting to grips with their new role
  • an overall inability of the business to meet short or long-term goals.

 

The extent to which poor employee retention rates will impact a business will very much depend on the nature and size of that business. In those organisations where the workforce comprises a high proportion of unskilled staff, it may be relatively easy to find suitable replacements, although the cost of onboarding and training must still be factored in.

However, for any business requiring specialised or skilled professionals, the impact can be far greater, not least where employers must then spend months searching for a suitable replacement but the necessary skills are scarce and the cost of recruiting is high. In many cases, the more valuable the leaver, the more damaging their resignation, especially where they take with them key skills or knowledge essential to the running of the business.

 

What causes poor employee retention rates?

Poor employee retention rates can be due to a number of different reasons, where it may be a desire to make a change or a more compelling job opportunity that entices an employee to work for a new employer, especially if that opportunity offers better pay and benefits. However, more often than not, it is the negative factors within an employee’s existing role and/or working environment that will force that individual to actively look for employment elsewhere. As such, if employees are resigning from a business on a regular or large-scale basis, it is important for employers to identify the root cause(s) behind this.

Some of the most common reasons for high employee turnover rates can include:

  • inadequate salary or lack of regular pay rises
  • non-competitive perks and benefits
  • unfair treatment at work
  • inequality and lack of diversity
  • poor working relationships
  • unhappiness with management
  • poor employee wellbeing
  • poor work-life balance
  • feeling overworked and unsupported
  • inflexible working practices
  • a negative working environment
  • dissatisfaction with the company culture
  • limited career advancement
  • lack of recognition or feeling undervalued
  • lack of job satisfaction and boredom.

 

How to improve employee retention rates

The first step in reducing a problem with poor employee retention rates is by putting in place effective retention strategies, specifically tailored to the needs of the business. However, to be able to develop an effective strategy, the employer will need to identify the reasons for employees leaving the business. It is only by understanding why employees are seeking alternative employment, or simply quitting, that employers can begin to devise suitable retention initiatives to help respond to and resolve this costly issue.

Exit interviews can provide employers with invaluable insight into the employee perspective of working for the business, where leavers are often prepared to be transparent about their reasons for resigning, rather than asking existing members of staff. Employers can then use this data to help identify patterns in poor retention rates and decide how best to deal with this. However, the employer should also assess the impact that poor employee retention rates are having on their business, where the data collected can be used to develop a costed retention strategy that prioritises those issues having the greatest impact.

Ideally, any employee retention strategies decided upon should be clearly documented within a written policy. This will provide a clear template for those responsible within the business for people management practices, ensuring a consistent and united approach to keeping the workforce loyal and committed.

 

Examples of employee retention strategies

Fortunately, there are various ways in which employers can help to improve employee retention rates. Below we set out several different examples of effective employee retention strategies that can either be tried in isolation or, ideally, in combination, all of which have been shown to play a positive role in minimising the risk of employee resignation:

Opportunities for flexible working: in the wake of the coronavirus pandemic, many employees still prefer to work remotely, at least part-time. This is because flexible working can provide a much better work-life balance, with the ability to juggle professional and personal commitments. By being open to different kinds of flexible working arrangements, including but not limited to remote-working, this can be an extremely effective way for an employer to retain valuable members of staff, where a healthy work-life balance is essential to job satisfaction. This could include different start and finish times, or working full-time hours over fewer days, known as compressed hours.

Supporting employee wellbeing: in addition to providing flexible working options, seeking to accommodate individual preferences where at all possible, there are various other ways in which employers can support employee wellbeing. From effectively managing issues such as workplace stress to a range of wellness offerings, including discounted gym memberships and wellbeing days, this can help to ensure the health and happiness of the workforce. In turn, this is also likely to boost employee morale.

Promoting a supportive working environment: where employees feel overworked or unsupported or, worse still, both, this can often result in resignations. Employees must not only be practically supported in their job roles, but made to feel good about what they do and appreciated for their efforts. By ensuring that staff feel recognised for the work undertaken by them, from verbal praise through to recognition and reward systems, this can help to boost employee morale and job satisfaction. By promoting a supportive working environment in which employees feel valued, staff are far more likely to feel happy and motivated, not to mention loyal and committed to the business.

Opportunities for career progression: by maximising the opportunities for employees to develop their skills and progress their careers can go a long way to keeping employees engaged and committed. This is because they will feel confident that their future aspirations are taken seriously, and that their contribution to the business, both short and long-term, is valued. In circumstances where promotions are not readily available, employers could also consider sideway moves that allow employees to gain different development experiences, reducing the likelihood of boredom and disengagement.

Providing competitive compensation and benefits: although pay is not always the most important factor when it comes to employee retention, it is important that employers pay their staff a competitive rate for the work done in the context of the industry sector in question. This means that employers should regularly evaluate and adjust salaries accordingly, staying current based on the latest market standards for pay. Even if the business is unable to facilitate an immediate pay rise at any given time, there may be other forms of compensation or financial perks that could help to retain employees, including additional paid annual leave or paid parental leave.

Fostering healthy working relationships: poor working relationships with either co-workers or management can often lead to disengagement or even workplace conflict which, in turn, can result in resignations. By encouraging open communication, where staff are supported in voicing their concerns, this can help to minimise conflict. Putting in place easy-to-understand grievance procedures can also help employees to feel confident that any complaint will be fairly investigated and their concerns will be heard.

Ensuring equality and diversity: treating employees fairly, especially when it comes to equality and diversity, can be key to keeping the workforce happy. This means that there must be policies in place which adequately deal with equal treatment at work, as well as harassment, bullying and discrimination. By promoting a fair and inclusive working environment in which employees can thrive, and where any unwanted or unlawful conduct is reduced, this can help to create a positive working environment for everyone.

 

The role of recruitment & onboarding in employee retention

The employee retention strategies outlined above are just some of the ways to help reduce high employee turnover rates within an organisation. However, employers should regularly re-evaluate their efforts, including the most up-to-date data around employee resignations, to see if further changes may still be needed. In many cases, the employer may need to trial a number of different strategies, or combination of strategies, over a period of time.

It is also important for employers suffering from poor employee retention rates to re-evaluate their recruitment and onboarding procedures. This is because hasty hiring decisions, either by the employer or prospective employee, can often result in early resignations. The employer must be careful to select the right candidate for the role, despite any urgent need to fill a skills gap. The employer should also exercise caution in the way in which they sell the position to potential candidates. By overselling the role, or otherwise raising the employee’s expectations during the recruitment process about what the business can offer them, can commonly lead to new-starters resigning within a matter of weeks.

Equally, when a successful candidate is onboarded, the induction procedures should not be skimped on, as first impressions can easily influence an employee’s decision to leave a business, sooner rather than later. The onboarding process should teach new recruits not only about their job role, but also about the company culture, explaining how they can contribute to and thrive in it, in this way setting them up for success. The training and support that an employee receives from day one can set the tone for the entire employment journey — ideally from start to retirement, not start to early resignation.

It goes without saying that some employees will inevitably leave sooner than an employer would like, moving on to pastures new, but by making their time in the business worthwhile and enjoyable, this can help to make any decision to leave a little bit harder.

 

Employee retention FAQs

What is meant by employee retention?

Employee retention is the ability of an organisation to retain staff and sustain its workforce, typically measured as the proportion of employees with a specific length of service, say a year or more, expressed as a percentage of workforce numbers.

Why is employee retention important?

Employee retention is important to the successful running of a business, where the costs associated with high employee turnover rates can be significant, from temporary staff cover to recruitment and training costs, not to mention the loss of valuable talent.

What is good employee retention?

Generally speaking, an employee retention rate of 80% or higher is considered to be good. Where a business is experiencing low staff turnover rates, this is often indicative of effective retention strategies designed to keep the workforce satisfied and loyal.

What determines employee retention?

Employee retention is often determined by the working conditions in which employees are required to do their job role. For example, well-paid employees with high levels of support and recognition are more likely to stay loyal to the business.

Last updated: 12 January 2023 

Author

Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.

She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.

Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals

About DavidsonMorris

As employer solutions lawyers, DavidsonMorris offers a complete and cost-effective capability to meet employers’ needs across UK immigration and employment law, HR and global mobility.

Led by Anne Morris, one of the UK’s preeminent immigration lawyers, and with rankings in The Legal 500 and Chambers & Partners, we’re a multi-disciplinary team helping organisations to meet their people objectives, while reducing legal risk and nurturing workforce relations.

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