by Erin Yurday, CEO, Co-founder and Editor of NimbleFins
Replacing employees after they’ve decided to move on can be expensive and time-consuming. A business must provide a good work environment with enough benefits to help retain employees, else it’ll be hiring and training new employees far more often than is desirable.
Of course, for any business hiring employees then it goes without saying that employers’ liability insurance is required by law. In addition, businesses can invest in other types of protection that can benefit employees, such as personal injury and private health insurance. Beyond insurance perks, how can a business help attract and retain employees? And why is retaining employees important?
Why retain employees
Retaining employees is important to help save time and money, as well as ensure consistency in a business. Firstly, let’s cover the financial impact of an employee leaving.
When an employee leaves, the business have to advertise for a new position, which can cost in terms of time spent setting up ads, writing job descriptions and monitoring the ads over time. Or more directly, a business may need to pay to promote a sponsored ad on a job site such as Indeed.
With a list of candidates in hand, the next step is trawling through CVs, contacting, and eventually interviewing the shortlist. That’s potentially a lot of time spent on replacing an employee, which costs money in wages and detracts from undertaking a business’s actual work.
On top of all these factors, a business should consider that the new employee won’t necessarily be as efficient or productive as the old employee right away. It might take weeks or months for them to get up to the same level.
According to research, the average cost for replacing an employee earning £25,000 or more, is £30,614. While that sounds high, around £5,433 of that is the direct cost of replacing the employee, such as job advertisements or recruitment agencies. Meanwhile, up to £25,182 is from the loss of productivity, as they say it can cost up to 28 weeks for the new employee to get up to speed.
While the cost quoted above may not be quite right for all small businesses, it paints the picture that replacing an employee costs money in more ways than just salary.
Why do employees leave?
Employees may leave for many reasons which aren’t always obvious to management. While sometimes it may be a personal reason that you can’t do much about it, more often than not, it’s a problem with the workplace itself. Some of the common reasons employees may leave a company can include:
- Low salary and/or poor employee benefits
- No ownership over projects or decision making
- Poor work-life balance
- Inflexible working hours
- Lack of progression/ development opportunities
- Bad company culture
- General boredom with their work
Employees aren’t always transparent about why they’re leaving as they want to make sure they secure a good reference. For that reason, they often say the problem is better than it is. The best thing to do on a mission to retain employees is to find out why they’re leaving, so holding exit interviews can provide really valuable insight.
The Society for Human Resource Management’s ‘Human Capital Benchmarking Report’ says there’s an average of a 13% voluntary staff turnover rate. That means in any given year, around 13% of staff will leave by their own means, which rises to 18% when we include involuntary turnover. It’s essential to find out why staff leave to help reduce turnover.
How to retain the best employees
Quick employee turn-around isn’t inevitable and there are lots of things you can do to reduce employee churn. With so many options for employees to move to different companies, think hard about offering more than the competition. Once information has been gleaned from exit interviews regarding why someone wants to leave the company, the business can get to work solving the issues to decrease the frequency going forward.
1. Hold regular employee reviews.
For ongoing oversight and monitoring of any issues among employees, businesses should hold regular ongoing reviews to help employees grow in their role as well as offer an opportunity to provide management with key feedback. By monitoring issues throughout the year, a business may be able to solve them before it’s too late.
2. Offer flexible working arrangements.
With Coronavirus impacting how many people work, employees are now looking for more flexible working arrangements. This can include flexible working hours, as well as the flexibility to choose where to work. With these becoming the norm more and more, businesses based in an office environment could consider offering employees the opportunity to work remotely a few days per week depending on their needs.
Or, take advantage of flexi-time which allows employees to decide when they start and finish work. This can still be set around core working hours. Research has shown that 77% of men and 78% of women have had a positive impact from using flexible working arrangements.
3. Create a positive work culture.
A good work culture can mean lots of things, from how management treats employees (e.g. valuing their wellbeing), policies (e.g. compensation and progression opportunities), to people with a good set of values and beliefs. Fun is important, too, so company outings, team-building events and happy hours can all contribute to a good workplace culture.
Positive workplace culture can enhance employees’ happiness in their job, also improving their performance which benefits the company. This will make a company a more desirable place to work and help improve retention and attract top talent.
4. Offer the right salary.
Offering a salary that’s too low and below the market average for the same job is a quick way to lose employees, as well as not attracting new employees too. Be realistic as to what a business can afford and not undercut simply to save some money as employees notice when they feel they’re not being paid respectfully.
The salary needs to be appealing enough from the get-go, as well as with opportunities for salary progression in the future as employees become more skilled and take on further responsibilities.
Retaining employees is an important thing to do for any business to do. It will help save money, improve productivity and the overall consistency in a business’ performance. While all employees will eventually leave a company, it’s possible to cut down on regular voluntary staff turnover by implementing new policies and procedures, such as offering flexible working arrangements.
Erin Yurday is the CEO, Co-founder and Editor of NimbleFins, a market research company specialised in aiding businesses and professionals in their decision-making. Prior to NimbleFins, she worked as an investment professional and as the finance expert in Stanford University’s Graduate School of Business case writing team. Read more on LinkedIn.