Having meticulously recruited the right employees, your organisation will only run smoothly if you keep them there. Retention is the work involved in ensuring that employees remain on board. A high rate of employee retention saves your business money and minimises disruption, allowing you to focus on your strategic goals.
Holding onto your key staff is the goal of retention. Apart from the cost savings involved in recruiting new employees, losing staff can have more far reaching effects on your company.
The costs of recruiting replacement employees include:
- administration time dealing with resignations
- payment of temporary staff to complete work created by a vacancy
- payment of recruitment consultants
- time spent training a new employee.
While the financial costs are a concern, losing key staff can lead to more damaging downsides for your business. Employees who have specialist skills or close relationships with customers for instance will be hard to replace.
Businesses operating in certain industries will have a high demand for low-skilled, casual workers. High rates of staff turnover are to be expected in such industries.
Assess employee turnover and retention rates
Employee turnover calculates the proportion of employees that leave an organisation over a period (typically a year) expressed as a percentage of the total employee headcount.
Employee turnover is calculated using the formula below:
No. of people who left your company x 100 / Average no. of people employed
Your company’s retention rate at any given moment can be calculated using this formula:
No. of staff with service of 1+ years x 100 / No. of staff employed 1 year ago
Figuring out why employees leave
Although each employee will have a different reason for leaving it is useful to try to identify if any factors are common to all departing employees. Some common reasons for leaving include:
- poor relationships with line managers or colleagues
- they have received a position with a competitor offering better pay and other rewards
- poor fit with organisational culture
- lack of professional development opportunities