Employee retention is a big issue in the workforce. It’s not just about keeping your employees happy, it’s about retaining your talent and ensuring you keep the best people with you as long as possible.
One-third of new employees quit after about six (6) months, according to statistics. This is a significant number and one that needs to be addressed with some urgency if employers want to fix this problem in their company.
Each month in the US, 3 to 4.5 million employees quit their job according to the Job Openings and Labor Turnover Survey (JOLTS). One survey found 94% would stay at their current employer if they invested in their long term learning.
Statistics show that employee turnover has been rising in recent years. Employers are not only losing valuable talent but also having to deal with hiring, training, and replacing lost workers.
What is employee retention?
An organization’s ability to keep its employees refers to employee retention. The retention rate of employees can be expressed by a simple statistic. Employee retention, however, is frequently regarded as the effort employers make to keep their employees.
Why employee retention is important
Employee turnover is part of any business. However, retaining employees from the beginning will help reduce the hassle and wasted time. It is both costly and detrimental to a business to have low employee retention.
Think about it when an employee leaves a company, it takes a considerable chunk of time to deal with their departure. In fact, entry-level employees typically cost 50% of their salary to replace.
Employee retention also helps boost morale, reduces costs, maintains a good customer experience, and reduces overall costs.
The best way to retain employees is by making them feel valued and providing them the opportunity for growth within your organization. When an employee does not feel valued at work, 76% look for another job opportunity
A workplace survey report found that 94% of surveyed employees responded that if a company invested in helping them learn, they would stay longer.
This can be done through training programs or mentoring opportunities that will help develop skillsets in new areas.
It’s important to make sure you are offering these types of opportunities so they feel like they have something to look forward to. If not, then there may come a point where they leave because they don’t see any future for themselves at your business.
It costs an employer an average of 33% of an employee’s yearly salary for their exit.
The cost of replacing employees is high. So, before making rigorous decisions employers should screen and assess with the help of the right tools on their current roles and responsibilities.
On the other hand, the process of finding the best talent typically involves advertising job postings, recruitment agencies, screening, interviews, and hiring.
This adds up to spending a lot of time, money, and energy to replace workers that could have been retained with a good employee retention strategy.
Statistics on employee retention
In the 2021 Bureau of Labor Statistics report, the overall turnover rate is 57.3 %, but that number drops to 25% when considering only voluntary turnover, 29% when considering involuntary turnover, and just 3% when looking at only high-performers.
One report suggests that a turnover rate of close to 19% can be expected in many industries. SHRM estimates that the average cost-per-hire for a new employee is $4129.
Economic News Releases from the Bureau of Labor Statistics report that employees earning wages and salaries averaged 4.6 years with their current employer.
A person changes careers on average when they are 39 years old. Over the next five years, 87% of respondents surveyed by Kronos consider improved employee retention a high or critical priority. An analysis of 34,000 responses to the Work Institute’s 2017 Retention Report found that 75% of the reasons for employee turnover can be prevented.
The most common reason employees leave their jobs is because they are not being challenged at work. This includes feeling under-appreciated and bored with what you do every day. If this sounds familiar, it may help if you think about how an employee’s job fits into a bigger picture or strategy.
You could also consider allowing employees to change roles within your company so they have more opportunty for growth, the chance to learn new skills and grow professionally.
There is a 16% decrease in retention rates for employees who aren’t comfortable giving upward feedback.
This was an interesting statistic found in the Tinypulse retention report. This makes it clear that managers and employees must communicate clearly in order to understand the needs and make improvements.
Regularly communicating employee thoughts to management should be strongly encouraged. It shows your employees that they are valued if you keep lines of communication open.
Regular and honest communication enhances employee retention by showing employees that their contribution is valued. As a leader, it also helps you recognize when adjustments may be needed in your employee retention strategy.
A good onboarding program leads to 69% of employees staying at least 3 years.
A survey conducted by CareerBuilder and Silkroad Technology (9%) represents the number of employees who left their company because of poor onboarding experiences, and 37% percent said their manager was not part of their onboarding experience.
Losing 1 in 10 people to a poor onboarding experience is something a good company should be able to fix quickly.
The most common reason for leaving an employer? Poor management practices. The second-most cited reason: lack of career development opportunities. And third on that list: bad culture fit.
If you’re looking at your own employee retention numbers, it might help to know what those three things are. If they aren’t addressed, then you can expect more turnover — which means less productivity and higher costs.
What is the national average employee retention rate?
As a general rule, employee retention rates of 90 percent or higher are considered good and a company should aim for a turnover rate of 10% or less.
The following factors can affect an employer’s ability to retain employees:
• Lack of training and development opportunities for new hires
• Poor communication between management and staff members
• Unclear job descriptions that do not clearly define responsibilities
• Inadequate staffing levels to cover the workload.
• A lack of recognition by managers when their work is done well
• An inability to provide feedback on performance issues
• The need for more flexible working hours
• High turnover costs associated with hiring and firing workers
How much is employee retention worth?
It costs 33% of a worker’s annual salary to replace them if they leave, according to Employee Benefit News.
The Work Institute’s Retention Report shows that the replacement cost is $16,500 per person for an employee earning a median salary of $50,000 a year.
Employee retention rate by industry
BLS statistics show the following numbers in 2019. As you can Government related jobs had the lowest amount of separations/turnovers compared to the highest turnover in the entertainment and hospitality industries.
Top 5 best retention rates in 2019 by industry
|Industry / Year 2019||Total Separations as a percent of annual average employment|
|Finance and insurance||24.6%|
|Manufacturing / durable goods||28.6%|
Top 5 worst retention rates in 2019 by industry
|Industry / Year 2019||Total separations as a percent of annual average employment|
|Arts, entertainment, and recreation||79.5%|
|Leisure and hospitality||79.0%|
|Accommodation and food services||78.9%|
|Professional and business services||63.5%|
What is the difference between retention rate and turnover rate?
Retention rate is the percentage of a company’s customers that remain with them for a set period of time. Turnover rate is measuring the percentage of employees that leave in a given period.
The two are not directly related, but they can be used to calculate how long it will take your business to reach its target market size.
Creating an employee retention strategy
The following metrics should be monitored as part of your employee retention strategy:
- The average turnover is related to promotions or transfers.
- The average tenure of your employees.
- Tracking positions filled vs positions that are open
- When measuring the turnover rate break them down into three categories: Voluntary, Involuntary, and employees noted as high-performing.
You should also take into context the average retention rates for your industry. Industries such as food service have problems with restaurant staffing issues. Food service and retail have higher turnover than other sectors.
No matter how much data you collect, you won’t improve retention and turnover unless you do something. While tracking employee turnover and retention is the first step, the real work begins when you assess these rates in relation to your industry and identify what needs to be done to improve your retention strategies.
The most common reason for high attrition rates is that employees are not being given enough opportunities to grow professionally or personally within their organization. This can happen if managers don’t provide training on new skills or give people chances to learn from mistakes they make while working with clients.
If this happens often enough, it will lead to a loss of talent. The best way to prevent this problem is by providing ongoing professional development programs so that staff members have access to learning resources as needed.