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Employee retention is more important than ever as record numbers of people are quitting their jobs and experiencing burnout.
According to the Bureau of Labor Statistics, 4.5 million Americans left their jobs in March 2022 alone.1 And these mass exits may not slow down any time soon. Factors like low pay, lack of advancement opportunities, and feeling disrespected contribute to this so-called “Great Resignation," which was spurred by the 2020 pandemic.2
That's why business owners have to be proactive about employee retention. With the right employee retention strategies, small businesses can help prevent turnover and save costs.
Most importantly, they can create productive and inclusive work environments that help team members feel more valued in their roles.
Whether you're getting ready to hire your first employees or looking to keep your current teams on board, employee retention strategies can help.
In this guide, we'll explain what employee retention is and share 10 employee retention strategies to help your business grow.
Employee retention refers to a company's ability to retain employees in their workforce and prevent turnover.
You can measure your employee retention rate by dividing the number of employees you have now by the number of employees you had at the beginning of a certain time period, such as a year ago.
If you have 85 employees now and you had 100 employees this time last year, your retention rate is 85%.
Employee retention is important because turnover is costly. According to Gallup, replacing an employee can cost one-half to two times the employee's annual salary.3 So replacing an employee who makes $50,000 can cost up to $100,000.
For example, that may cover the costs of recruiting, onboarding, and training a new employee — and making up for the productivity lost during that time.
On top of that, employee turnover can lower company morale and confuse or frustrate current clients and customers. It can also take a toll on current employees who now have to cover the workloads of those who left. That's why it's so important to have employee retention strategies in place.
Employee retention isn't just the responsibility of managers and HR teams. It should be a company-wide priority. Everyone should understand how to retain employees and contribute to a more supportive workplace — from owners and directors to individual staff members.
You can start by implementing these employee retention ideas and tips.
One of the most effective ways to retain employees is to create a strong employee value proposition (EVP). An EVP is the full set of benefits that a business offers an employee, including salary, stock options, training and skills, career growth, and perks like remote work options and access to equipment.
Basically, your EVP should answer the question: Why would a highly qualified person choose to work with us as opposed to another company?
With a strong EVP, you can help your business stand out from the competition and hire top employees. You can also show potential talent that you're willing to invest in their careers and build long-term relationships.
Learn how to create employee value proposition by following these steps:
Employee onboarding programs should provide new hires with the training and resources they need to start their jobs with confidence. Onboarding programs can also improve retention because they help integrate employees into the company culture and set expectations from the get-go.
In other words, they give people the tools they need to succeed not just in their first month or year but in the long term.
You can use these tips to onboard a new employee:
A competitive salary can help you entice qualified candidates. But beyond just that base pay, businesses should offer benefits to retain employees and invest in their overall wellness.
According to a recent Forbes survey, 40% of employers believe workers would leave their jobs for better benefits elsewhere. And one in 10 workers would actually take a pay cut to access better benefits, proving that non-salary incentives can be even more important than wages.4
Common examples of employee benefits include:
Managers can make or break an employee's work experience. A well-trained and supportive manager, for instance, can boost team morale and productivity.
But a manager with poor leadership skills can frustrate employees and hold them back from achieving their full potential. As GoodHire found, 82% of Americans would potentially quit their job because of a bad manager.5
Evidently, managers have a big opportunity to improve employee retention from the top down. Business owners can help managers optimize their leadership skills with these tips:
Never underestimate the power of saying "thank you" and "great job!" In fact, publicly recognizing good performance is one of our top tips for managing your first employees.
As the Brandon Hall Group reported, companies that give frequent recognition are 41% more likely to see increased employee retention.6 Gallup and Workhuman also found that employees who receive recognition are 56% less likely to look for other job opportunities and 3x as likely to feel loyal to their organization.7
You can use these employee recognition ideas to help your staff feel seen:
Communication and transparency are vital for employees. People should know what's happening inside their departments and throughout the company as a whole. They should also be able to easily share their feedback, and know that they'll be heard.
Some tips to improve employee communication include:
One of the best ways to retain employees is to promote a healthy work-life balance. That means encouraging people to prioritize their physical, mental, and emotional health. This can help reduce employee burnout, which has been on the rise since the pandemic.
As Gallup reported, employees who frequently experience burnout are 2.6x as likely to be seeking a different job.8
You can help employees achieve a healthy work-life balance by:
It's important for employees to feel part of their company's culture. If they belong to a community with shared values and goals — instead of just showing up and doing a job — they can be more engaged in their work.
On the other hand, 64% of employees who say they have a poor workplace culture have actively looked for a new job in the past six months.9
You can help build and reinforce company culture by establishing rituals like:
An Employee Net Promoter Score (eNPS) is a single number from -100 to +100 that measures employee loyalty and satisfaction. While simple, your eNPS can be a good indicator of how content your employees are in their jobs.
It's also easy to measure your eNPS. Simply survey your employees anonymously with one question: “On a scale of 0-10, how likely are you to recommend this business as a place to work?"
After surveying all of your employees, you subtract the percentage of detractors from the percentage of promoters to find your eNPS. You can then use this eNPS rating to better understand how people feel about working for your business and how you might be able to improve retention and satisfaction.
Even after offering the basics like a competitive salary and insurance packages, you can go further by providing extra job perks to keep your employees happy. We're not talking about benefits, which are necessary financial investments for your company. We're talking about additional rewards and incentives, which can be more creative and less costly for your business.
For example, you might offer gym memberships, discounts at certain restaurants and stores, and free snacks and drinks in the office. You may also help employees build out their remote workspaces with home office stipends and free or discounted technical equipment. You may even offer perks for pet owners like a pet-friendly office and discounts at pet shops.
As always, you can also ask your current and potential employees which perks and rewards would make the biggest impact in their lives. Then build their feedback into your employee retention program to reduce turnover and deliver true value to your staff.
Looking for more ways to refresh your strategies and meet your goals for the rest of the year? Check out our guide to spring cleaning your business.
In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.
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