You’re not the only one. In LinkedIn’s latest Workplace Learning Report, HR leaders at more than 90% of the organisations surveyed also shared concerns over employee retention.
And with 60% of businesses in the UK reporting that they found it harder to retain talent in 2022 than in the previous year, what can you do to give your business a competitive edge?
What is employee retention?
Employee retention refers to the number of employees that stay with an organisation. It’s usually expressed as a rate and measured over a particular period – typically a year or more –alongside the organisation’s employee turnover rate.
What is a good employee retention rate?
This will vary depending on the industry and the nature of the job roles in your business. To get a range, we can look at recent LinkedIn data on employee turnover rates. In 2022, the average employee turnover rate was 10.6%.
This suggests that an employee retention rate of between 90-95% is a good benchmark to aim for. It will help you keep your turnover rate below the average, while also recognising that some level of change is healthy, allowing for fresh perspectives and new ideas.
Why is employee retention important?
There is a growing skills shortage – where applicants or workers do not have the technical skills required to perform a role – in the UK and across the EU.
Job vacancies are at record highs and the number of employers with “hard-to-fill” vacancies has increased by 11% over the past quarter in the UK – rising from 46% in October 2022 to 57% in January 2023– with 40% of these vacancies caused by skills shortages.
The position is even worse in Europe, with the European Commission reporting in October that more than three quarters of companies in the EU have found it difficult to find workers with the necessary skills for their jobs.
Employers can avoid entering this competition for talent if they successfully retain their existing employees.
Many workers are also continuing to look for new job opportunities – despite recent Big Tech job cuts and the current economic uncertainty – which makes retention efforts even more essential for all businesses. Basically, it’s a bit of a snooze you lose scenario right now!
For example, one-third of European workers surveyed in September by McKinsey said that they expected to quit their jobs in the next three to six months. The position is similar in the UK, with nearly one in five workers saying they are very or extremely likely to change jobs in the next 12 months.
So, what can businesses do about it? We’re going to dive a little deeper into the benefits of employee retention strategies first. Would you prefer to skip straight to learning about the strategies? You can read about five effective employee retention strategies here.
What are the benefits of employee retention?
There are many!
#1 It can help minimise disruption and associated costs
Employee turnover will always cause some level of disruption to your business, and the costs of this extend far beyond simply recruiting a replacement.
You lose knowledge. You need to arrange cover, and you have training and relationship building costs. It will also take time for your new hire to get up to their maximum productivity levels.
All this will cost your business money. The figures on just how much can vary greatly. HR consulting firm Gallup gives a range of one-half to two times an employee’s annual salary and call that conservative.
What is clear is that improving employee retention rates will mean less disruption, less costs and more retained knowledge and experience.
#2 It can lead to better performance and productivity
Reducing your employee turnover will help to reduce stress – particularly where the workloads of remaining employees are increased to make up for gaps – and can improve staff morale.
This and other retention strategies can help increase employee engagement, which is often cited as having positive performance effects and can – according to HR consulting firm Gallup – increase productivity by 18%. It can also lead to a 23% profitability increase!
How to improve employee retention
Experts argue that employers must take a holistic and systematic approach to employee retention in 2023.
It’s no longer enough for an employer to take individual reactionary measures – which are often materialistic, and easily replicated by competitors – to solve employee retention problems.
Instead, employers should focus on designing or rethinking their entire employee value proposition and ensuring that they are at minimum aligned with others in their market.
Wondering where your benefits stack up to others in your country? Check out our French, Dutch & German Benefits Reports!
Design an employee value proposition
An employee value proposition is the totality of what a business offers an employee in return for the work that they do.
The Harvard Business Review (“HBR”) frames the EVP as a system made up of four interrelated factors:
Material offerings (including compensation, equipment, flexibility, schedules and perks)
Growth and development opportunities
Connection and community (the culture of the company, and what it offers people)
Meaning and purpose alignment
HBR argues that fulfilling all these factors is the key to a successful employee value proposition and employee retention strategy.
It also argues that employers should assess how potential actions and changes will influence these factors before they make decisions.
Naturally, the value each set of employees place on each factor will vary, and ongoing engagement and discussion will be key.
Strategies for improving employee retention
So, what kind of measures can you take to improve your employee value proposition and increase employee retention?
Effective communication is also key. Get ahead of the game and start talking about your compensation the right way. Learn how in our guide.
Looking for more resources, tools and content?
That's why we created Figures, you don't need to be a compensation expert, we are. With our an all-in-one compensation platform updated in real-time, expert HR and People insights, we want to make your job more efficient and power more fair decisions.
One of the most essential parts of the compensation review process is defining your budget. And exactly what this process looks like is different for every organisation, because your overall compensation philosophy should underpin it. That said, there are some guidelines and standard practices that most companies abide by — read on to learn more.
How Compensation Reviews Impact Your Company Culture (and Vice Versa)
In this article, we’ll dive into the link between company culture and the compensation review process — with a little help from our friends at Mo, an employee reward and recognition platform in the UK.