The labor market is having a moment. Employees are quitting, roles are remaining open, and businesses are trying to maintain their employee retention rate. This issue is even more prominent among hourly workers.
Employee retainment has quickly become a competitive advantage across every industry. This means many companies are looking for ways to keep employees satisfied, productive, and most importantly, on the payroll.
HR leaders looking to level up their employee retention tactics should start with revisiting the basics. Like, understanding how to calculate employee retention rates and the importance of employee retention.
So, let’s dig in!
Why Employee Retention Is Important?
The importance of employee retention has many layers. First, we should start with what is employee retention?
Employee retention is an organization’s ability to keep talent by engaging, motivating, and communicating with employees. A reduction in employee turnover is a direct result of stronger employee retention.
One of the top reasons why employee retention is important is it boosts employee satisfaction. When employees elect to stay at their company, they are signaling they are satisfied with their work, benefits, and workplace culture.
There are also loads of other benefits to employee retention, such as having:
- An engaged and productive workforce
- A competitive advantage in a tight labor market
- Reduced costs associated with replaced employees
- A more collaborative workplace culture
- A dedicated team that enjoys coming to work
Employee turnover impacts all industries, but it’s particularly important to manage in the retail, manufacturing, and hospitality spaces.
According to the National Retail Federation, the average turnover for retailers is 60% compared to the national average of 19%.
For frontline-majority industries, losing even one employee means holes in the schedule, re-allocation of work, and another hit to the team’s morale. So, measuring and managing employee retention is essential for keeping your growing business going and building a strong, agile workforce as we transition into the new normal.
How To Calculate Employee Retention Rates
Employee retention is most often measured by your employee retention rate. But, how do you calculate your employee retention rate?
Start by identifying the period of time you want to consider. Are you measuring your employee retention rate over the past quarter or 12 months? Or, have you undertaken some serious culture-refining initiatives over the past few years and want to track your success?
Employee retention rates are often calculated on an annual basis. But defining a longer period of time can also capture employee retention KPIs for other uses.
The employee retention rate formula looks at the number of employees who stayed with the company during the defined period and divides it by the total number of employees at the start of the period.
Let’s put this into practice. Let’s say you want to look at how many frontline employees you retained in 2020. As of January 1, 2020, you have 100 frontline team members. And, as of December 31, 2020, you employed 85 frontliners. Your employee retention rate would be (calculated as 85/100 x 100) 85%.
What Is a Good Employee Retention Rate?
Now, you have your employee retention rate. Great! Or is it great?
The next thing you might be asking yourself is, what is a good employee retention rate? That largely depends on your industry.
The average and ideal employee retention rate in the U.S. is 90%. Although the impact of COVID has likely dropped this number dramatically.
However, retail and hospitality businesses have high employee turnover, so their retention rates probably won’t reach the national standard.
What Is a High Turnover Rate?
We’ve covered employee retention in deep detail. So, what happens when retainment levels take a hit? Employee turnover increases.
Think of employee retainment and employee turnover like a seesaw. When one goes down, the other goes up because they are the direct opposite of one another.
Just like employee retention, it’s considered a best practice to also measure your staff turnover rate.
An employee turnover rate captures how many employees are leaving the business over a given period.
Below is the formula for measuring your employee turnover rate:
Determining whether your employee turnover rate is high or low also depends on your industry and the size of your business. So, take a look at some of your peers and see how they show up.
Causes of High Turnover
Similar to employee retainment, there are a lot of factors that can spark high turnover, such as:
- Lack of employee engagement
- No access to important news or information
- Limited employee recognition or feedback opportunities
- Low employee empowerment and productivity
- Siloed or cut-throat workplace cultures
- No work/life balance or workplace flexibility
Some of these reasons sound all too familiar. But, when these issues are addressed, businesses are better positioned to reduce employee turnover and increase retention rates.
What Makes Employees Stay?
In April 2021, a staggering four million people quit their jobs. And another 3.9 million left two months later in June 2021. All the while, there were more than 10 million job openings in June.
This means the labor gap is growing. And, employee retention is more important now than it ever has been before.
So, what makes employees stay? Outside of financial rewards and career progression, a proven way to increase retention is by focusing on employee engagement. In fact, highly engaged teams see 59% less turnover than less engaged teams.
Other factors that influence employee loyalty are:
- Alignment in employee values, mission, and purpose
- Team collaboration and engagement
- User-centric communication channels
- Regular feedback (and the opportunity to provide feedback)
- Workplace and work schedule flexibility
- Accessible training and development opportunities
Top Tips For Maintaining A High Employee Retention Rate
When it comes to maintaining high employee retention, try starting with best practices. Here are our top five tips for keeping your top talent.
Laser In On Employee Engagement
If you’re ready to improve retention in your workforce, the first step is looking at employee engagement.
Are your employees motivated, present, challenged, and inspired? If not, there are plenty of ways to boost employee engagement, such as:
- Adopting collaboration, and productivity tools specific to their needs
- Promoting training and development opportunities that are easily accessible
- Creating a workplace culture employees want to be apart of
- Offering employees rewards your team members want
- Asking for the feedback – and acting on it!
But remember, increasing engagement isn’t for the passive. Employees need active, purposeful approaches, tools, and support to foster their engagement.
Adopt An Employee Retention Strategy
Because talent retainment is crucial to business success, it’s even more important to establish purposeful employee retention strategies. From attracting and hiring the right employees, to measuring performance and developing solid managers, you can create a retention strategy across every employee touchpoint.
Connect With All Employees
Employee retention and engagement look at all employees – not just the ones sitting behind a computer. So whether you hire contractors or permanent staff, it’s vital to stay connected with your frontline employees.
Frontliners make up the majority of the global workforce. And that means the majority of workers are on the go without access to a corporate email address.
These essential employees need a mobile collaboration and productivity platform, like Beekeeper, built specifically for them so they can:
- Access critical information from anywhere
- Communicate with their manager and colleagues in real-time
- Provide feedback right on their devices
- Have a centralized platform that integrates with their other important workplace apps
Listen To Their Needs
As simple as it sounds, listening to your employees can go a long way in retaining employees.
Think back to the last time you gave your manager feedback. What did they do with it?
If they did nothing, it likely made you feel as if your opinions don’t matter. And if they did take action, you probably felt even more motivated.
Businesses thrive when their employees thrive. And, employees thrive when they feel connected, valued, and heard.
Give Recognition – Then, Give Some More
You’ve heard this before, but let’s rinse and repeat. Recognition and retention are interconnected.
63% of employees who receive recognition are unlikely to be scoping out the job market.
Outside of monetary rewards, employee recognition can come in many forms, like:
- Gift cards to employees’ favorite restaurants
- Extra PTO days
- Public shout-outs on their employee communication platform
- Company swag bags
- Team celebration calls
And, never forget the power of a simple ‘thank you.’ We could all use more of those these days!