According to a recent study, 40% of workers across the globe are considering changing jobs. Referred to as the age of the ‘Great Resignation,’ this willingness of employees to change jobs for new opportunities has led organizations throughout the world to make improving employee retention a top priority.
Unfortunately, employee turnover is virtually unavoidable, but that doesn’t mean that it’s not manageable. In fact, there are numerous steps your company can take to improve employee retention. This guide is designed to help your company do just that.
We explore the causes behind employee turnover and provide steps your organization can take to entice your workers to stay.
what is employee retention?
Employee retention is a company’s ability to retain employees by preventing them from leaving the company either voluntarily or involuntarily. High levels of employee retention have been linked to increased productivity, improved workplace morale and better quality of goods and services. Employee retention is typically measured over a set period of time, such as monthly, quarterly or annually. If your company is actively working towards improving retention rates, it’s recommended to track these rates on a monthly basis.
what is employee turnover?
Alternatively, employee turnover represents the number of employees who left the organization over a set period of time.
There are several types of employee turnover, including:
This type of employee turnover includes employees who resign from the company to either go work for another employer, start their own business or leave the workforce altogether, such as through retirement. This is the most difficult type of employee turnover to manage and the area where employers should focus on making improvements.
This type of employee turnover, on the other hand, includes employees who were forced to leave the company due to a number of reasons, such as policy violations, poor performance or toxic behaviors. While these positions still need to be filled, most involuntary terminations are controlled by the employer. It’s typically better to remove these employees from the workforce than to risk keeping them onboard.
This type of employee turnover occurs when the company purposely reduces the number of employees in its workforce. Planned redundancies could be due to a number of reasons, such as reduced production demands, automation or shifts in the business structure. Fortunately, these roles don’t need to be filled, however, extensive redundancies can damage workplace morale and entice some workers to leave. Any redundancy plan requires careful planning and full transparency.
With new hire costs averaging 21% of the position’s salary, high turnover rates can be quite costly. Considering today’s ongoing labor shortage, high turnover can hinder the company’s ability to maintain a full staff. High levels of turnover can also disrupt workplace productivity and diminish quality.
read more about employee turnoverwhat causes employee turnover — and what to do about it.
how to calculate employee retention and employee turnover
Before your organization can take steps to manage its employee retention and turnover rates, it must first understand the impact these factors have on the company. The best way to do this is to calculate both retention and turnover rates within the company. This step can not only help your company realize if it has an employee turnover problem, but it can also be used to measure the success of any strategies put in place.
how to calculate employee retention
The first step to calculating your employee retention rate is to determine the number of employees who remained with the company over a set period of time. This step can be done by subtracting the number of employees who left the company during this period from the number of workers employed at the beginning of the period.
number of employees who remained with the company = (number of workers employed at the beginning of the period) – (number of employees who left during this period)
Now, you can calculate your company’s employee retention rate by dividing the number of employees who remained with the company by the total number of employees and multiplying by 100.
- employee retention rate = ((number of employees who remained with the company) / (total number of employees)) * 100
For example, let’s say at the beginning of January, you had 350 employees. During the month, 20 employees left the company either voluntarily or involuntarily.
Therefore, at the end of the month 330 workers remained with the company (350-20=330).
Now, divide the number of employees who remained with the company by the total number of workers employed at the beginning of the month and multiply the quotient by 100. The calculation is ((330/350)*100) = 94% employee retention rate.
Your employee retention rate for the month of January would be 94%.
how to calculate employee turnover
The first step to calculating employee turnover is to determine the average number of workers your company employed over a set period of time. This calculation can be done by adding the number of workers employed at the beginning of the period to the number of workers employed at the end of the year and then dividing by two.
- average number of workers = ((number of workers employed at beginning of the period) + (number of workers employed at the end of the period)) / 2
With this number, you can calculate your company’s turnover rate by dividing the number of employees who left during the period by the average number of workers and then multiplying by 100.
- employee turnover rate = ((number of workers who left during the period) / (average number of workers)) * 100
For example, let’s say on January 1, your company has 120 employees and by December 31, it has 124.
You first need to calculate the average number of workers by adding 120 workers and 124 workers and then dividing by 2 for an average of 122 workers ((120 + 124)/2=122).
Now, let’s also say that throughout the year 5 employees left the company either voluntarily or involuntarily. You, then, divide the number of employees who left the company by the average number of workers and multiple by 100. The calculation is (5/122)*100 = 4% turnover rate.
Your employee turnover rate for the year would be 4%.
what causes employee turnover?
Employee turnover is a complex issue that’s spurred by numerous factors, including:
how to retain employees
Understanding the causes behind employee turnover is the first step to improving retention rates. It’s only with this understanding that your company can develop an employee retention strategy to overcome these challenges and entice your workers to stay.
Here’s a look at some of the top things your company can do to improve retention rates.
provide worklife coaching
For organizations the world over, the past two years have required adaptation and flexibility. The result, dubbed “The Great Resignation”, is a hyper-competitive talent market in which employers and employees experience a major disconnect. Right now, for global businesses, talent retention is everything. Organizations are racing to understand how best to motivate, develop, and, above all, keep their best people.
Employees are at the heart of your business success. When they thrive, your business thrives. Creating better outcomes for employees and for your business requires developing a workplace where all people feel their work is meaningful, their careers are on track, their future is bright and their individual needs are heard and addressed.
Put your people at the center of your business strategy. Dedicated 1:1 coaching helps employees set and achieve actionable goals to improve their life at work. It provides a confidential safe space. It allows them to step back and reframe. Discover and rethink. Confidently tackle challenges and overcome obstacles. Renew purpose and passion. Excel in their role, expand their skills and make informed decisions about their future. When employees receive the guidance and support they need, they are empowered.
download the guideinsights into the key role that coaching can play in retaining your talent
assess employer brand
The last thing you want is for employees to leave due to a toxic work environment. This issue can quickly spread and lead to an increased spike in turnover. Unfortunately, this often results in the toxic employees remaining with the company and nontoxic workers leaving.
Take the time to assess your company culture through one-on-one interviews and employee surveys. Exit interviews can also provide insights into the reasons why your workers are leaving. Quickly take steps to address any concerns and take care of toxic situations. Then, either modify your current workplace culture to match the demands of today’s workers or strengthen your current culture so employees clearly understand the company’s values.
offer competitive salaries and benefits
Salaries are, and have always been, the number one motivator for changing jobs. In a highly competitive job market, like we see today, offering a competitive compensation package is critical to employee retention. If you have not assessed your salary offerings within the last year, don’t wait any longer.
If your company wants to attract and retain top talent, it must offer competitive wages and benefits. Start by conducting a salary analysis for your industry to determine how your current salary offerings compare with other employers in your industry. This information can help you determine the optimal salary ranges for your company.
develop employee training and career advancement program
Don’t risk losing your best employees due to a lack of advancement within the company. Instead, develop a strong employee training program that allows workers to advance their skills and career opportunities. For example, providing both internal and external training opportunities, offering tuition reimbursement options and investing in mentorship or apprenticeship programs are all great options.
Furthermore, investing in upskilling and reskilling can not only improve retention rates, but can also help to close the skills gap within your company and allow it to secure the skills it needs for now and in the future. This seems like a win-win for both you and your employees.
In addition, create a process for growth within the company. Our research shows that nearly one-half of the global workforce considers career advancement a top motivator for changing jobs. This benefit could include everything from announcing job openings internally before going public to creating a comprehensive internal succession planning strategy.
offer flexible work options
According to our latest Employer Brand Research, the ability to maintain a healthy work-life balance is the second-highest motivator for changing jobs, falling only behind competitive salaries. You can help your employees maintain the right work-life balance by building some level of flexibility into their work schedule.
This step might include offering hybrid work options that allow employees to work from home several days a week or give workers the autonomy to set their own work schedules. For positions where this type of flexibility is not an option, there are still steps you can take to improve your employees' work-life balance. For instance, consider increasing the amount of paid time off provided and give the workers more leeway in how to use these days. Other options, such as shift swapping, compressed hours or part-time work options can also help.
the ability to maintain a healthy work-life balance is the second-highest motivator for changing jobs
initiate a recognition plan
If your company doesn’t already have a recognition program in place, now is the time. If, on the other hand, your company already has a recognition program in place, now is the time to bring it to the forefront.
Companies often see a direct correlation between employee recognition and retention rates. In fact, one recent study shows that ‘workplace recognition motivates, provides a sense of accomplishment, and makes employees feel valued for their work.’ This, in turn, leads to increased loyalty to the company and improved retention.
The most important thing to remember when managing a recognition program is to remain fair, unbiased, transparent and consistent. Employee recognition should start from the top and work down through management and be social, engaging and meaningful.
how to improve employee retentionlearn more about the best strategies for employee retention
impact of compensation on employee retention
According to a recent Microsoft survey, four in ten workers globally are considering leaving their jobs. While there are many reasons behind this desire to change jobs, our research shows that salaries are the number one motivator. What does this research mean for your company? Basically, if your organization is not offering competitive wages, not only will it struggle to attract quality talent, but you could risk losing your current workers as well.
four in ten workers globally are considering leaving their jobs
Today’s employees don’t just want better wages. They now have the power to demand it. The current labor shortage in conjunction with the growing skills gap has created a candidate-driven job market. Ultimately, if your employee compensation offerings are not in alignment with other employers in your industry, you will have a difficult time enticing your workers to stay.
how to establish an effective compensation package to drive employee retention
It may seem risky to be raising wages in an uncertain, post-pandemic market. But the real question is, ‘Can your company afford not to increase salaries?’ Can you afford to lose top-quality workers or spend time struggling to attract skilled candidates to fill vacant positions? Probably not.
The good news is that if done right, a salary increase can oftentimes pay for itself through reduced absenteeism and turnover, and increased production and quality. The trick is to use market insights to determine the optimal salary range. This rate should be high enough to remain competitive within your labor market and industry, yet not so high that it affects the overall stability of the company.
The first step to establishing an effective compensation package is to develop a comprehensive compensation strategy that aligns with your company’s overall business goals and objectives. It’s also important to understand the demands, pain points and hiring trends in your specific market. With this information in hand, you can build a compensation package that resonates with both candidates and your current workers. Start by conducting a salary audit that compares your current wage offerings with other employers in your local area and industry. This step can help your company determine if salaries need to be adjusted or if they are in alignment with industry standards.
Remaining relevant in today’s job market involves more than just raising salaries. It’s about offering a comprehensive employee compensation package that resonates with the workers. This means including meaningful benefits, such as health insurance, paid time off, flexible work options, child and eldercare subsidies and employee training, as part of the overall employment package. Take the time to better understand what today’s talent wants, especially those working in your specific location and industry.
how randstad can help you with employee retention
At Randstad, we partner with organizations throughout the world to improve their hiring practices and consequently their employee retention rate. We know that no two companies are the same, which is why we offer customized solutions to meet the specific needs of each client.
So, while our services change slightly from client to client based on needs, here’s a look at just some of the ways we can help your company improve retention rates.
how to retain talent
learn more about how Randstad can help your company retain top talentlearn more
latest updatessee all articles
09 August 2022
cause and effect of supply chain disruptions.
07 June 2022
how an HR solutions company can help you overcome the global labor shortage.
01 June 2022
tips for overcoming today’s global labor shortage.
25 May 2022
why is there a labor shortage in manufacturing?
18 May 2022
why is there a global labor shortage?
08 March 2022
how to #breakthebias on international women’s day.