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How to Calculate HR Employee Retention Rates
Around 3 million American employees have quit their jobs every month since June 2017. Employee turnover is an issue throughout many industries. Surprisingly, more than 50% of all companies globally have problems retaining some of their most valued employees. Turnover is expensive for any employer because you have to spend time and money hiring and training a replacement. On top of that, you also lose the added value that the former employees were bringing to your company.
Why You Need to Know Your Employee Retention Rates
Employee retention refers to a company’s ability to hold on to its employees. When it comes to employee retention strategies, your HR department can benefit from tracking specific data. One of the most important measurables is employee retention rates. This will enable you to track the effectiveness of current and new HR initiatives such as onboarding programs or financial wellness programs.
Retaining staff who are positive and engaged is a key element to maintaining a successful company that will continue to expand. Not only will high employee turnover cost you money, but it will also have a negative impact on company morale. One way you can make sure that you hold onto key workers who perform well is by implementing an employee retention program.
Why HR Employee Retention Rates Matter for Business
Employee retention rates do matter for your business. Here are a number of reasons why:
- Helping to manage employee turnover: Because retention programs focus on strengthening the relationship between management and employees, they offer effective ways to boost the morale of the whole company. Your company can maintain employee satisfaction by implementing employee assistance programs, employee recognition, as well as by offering benefits and competitive pay. HR specialists can make use of exit interview feedback to focus on areas of weakness and to improve relations with employees, thus minimizing turnover.
- Maintaining cost-effectiveness: Employee retention is crucial to your company’s bottom line because a high turnover will bite you in the budget. The cost of employee replacement can reach as high as 60% of an employee’s annual salary.
- Maintaining performance and productivity: Employee retention programs help to support your company’s productivity whereas hiring and training new employees takes time. The longer you have an unfilled position, the longer you have work which is not being done. Even when you manage to fill the position, your new employees must still overcome a learning curve before their work becomes profitable. Retaining employees means maintaining productivity.
- Enhancing recruitment: Your employees will be more inclined to stay with your company if you fulfill the promises you made when you hired them. If you don’t provide a realistic view, you won’t be able to help new hires with advancement opportunities.
- Increasing morale: When employees are enjoying what they are doing and are happy with the atmosphere in their place of work, they are much more likely to stay with your company. Creating a positive work environment strengthens your employees’ loyalty and commitment to your organization.
Employee Retention Best Practices
Implementing these practices can help your company retain valuable employees:
- Hire the right people: By hiring “A” players who provide the best value for your organization, you reduce the risk of high turnover. The key to recognizing “A” players is to focus on character as well as experience or skills. Having a team built from “A” players will ensure your employees are motivated and productive, which also means a more engaging work environment.
- Develop a great management team: This step is crucial for any effective retention strategy. Not only are managers responsible for executing the company’s vision and strategy, they are also the direct link between the executives and the employees.
- Empower your team: Encourage your team to make decisions. You can retain employees by avoiding bureaucratic hierarchies. Divide your employees into teams and allow them to make their own corporate decision based on your company’s values.
- Celebrate anniversaries: Studies show that employees are most likely to change jobs at the one year mark. There is also an increase in voluntary turnover at each successive annual anniversary. You can combat this by engaging employees around annual milestones by celebrating their anniversary with an unusual or funny gift.
- Encourage personal growth and development: If you’re running a smart company, you understand that people are your most important asset, so it makes sense to invest in their personal development. To maximize this strategy, you need to offer development plans which not only benefit the company but also the goals of your employees.
- Value fun in the workplace: If you want to retain your employees, another important strategy is to keep them passionate about their work while avoiding burnout. You can do this successfully by combining work and play. This will also help to build strong bonds between your employees. You can increase fun and happiness in many ways, from facilitating team games to allowing dogs in the workplace.
- Cultivate a cooperative culture: Many employers foster a highly competitive work environment. But if such an environment is built on mistrust, it is bound to fail because the employee turnover will be high. Instead, build a culture which is based on trust and cooperation.
- Offer security and support: It’s very worth your while to invest in employees who, in turn, invest in their work, and deliver with commitment. This means training employees in key skills and letting them add their own character to their job. It also means treating your employees with respect and offering them support and security. This will ensure that they are motivated to come up with creative new ideas to solve problems and to take initiative.
- Encourage a healthy balance between work and life: A healthy work/life balance is considered by many to be more important than salary and recognition. This means it’s a key feature for employee retention. You can hold on to your team members by providing the following:
- Child care services
- Access to exercise
- Company outings
- Wellness benefits
- Free learning
- Retirement benefits
- Don’t just assume employees are happy: Just because the members of your team are going through the motions doesn’t mean they are enjoying doing so. This is why having a feedback system in place is important. It gives employees a chance to express how they feel about their work and other team members without being judged.
How to Calculate Employee Retention Rates
Your employee retention rate is a helpful statistic which you can use as a benchmark or calculate periodically to assess your retention progress or decline. It’s a very simple formula to follow. All you have to do is to divide the number of employees who left during any given period by the total number of employees remaining at the end of the same period. Employee retention rates can vary greatly, depending on the industry, but generally, they are anywhere between 70-85%.
Whatever the size of your business, employee turnover will cost you time and money. While some turnover is inevitable, having an employee retention strategy in place will minimize the turnover and costs for your company.