Companies sometimes find it quite difficult to manage the company’s employee retention properly.
This is not a problem that we rarely encounter, because there are still many companies and their management that have not made employee retention levels the main focus in managing the company.
In fact, employee retention can be an important factor in retaining quality employees who can be important assets of the company.
Therefore, Mekari will explain in more detail about employee retention and how to manage it properly in order to retain your qualified employees within the company.
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Definition of Employee Retention
Employee retention is a company’s ability or effort to retain employees in the workplace. Retention aims to retain the best and loyal employees in the workplace for a long period of time.
The opposite of company retention is employee turnover . Turnover can occur if the cycle of employees who often leave the company for various reasons that make them uncomfortable for a long time.
Therefore, each company has a different retention rate. It can also show indicators of how well the company manages its employees and the level of job satisfaction of employees.
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Why Employee Retention Matters
There are several factors that are the reason for the existence of important employee retention for companies. Among others:
- Stable productivity : Employees who work for long periods of time can add significant value to the company. This is because they are likely to have a deeper understanding of the company’s vision, know how to meet the expectations of their role, and have acquired all the skills needed to complete tasks more effectively.
- Lowering company costs : Retaining skilled employees can be financially beneficial for a company. Finding and recruiting new employees is basically very time consuming and costly. With lower employee turnover costs, company finances can be invested more effectively.
- Reducing training time : Employees who have had a long experience in a company have higher self-confidence and capability to carry out daily work. New employees basically need time and training to adapt and build communication which can temporarily burden productivity.
Problems to be Faced
The urgency of managing employee retention arises based on the identification of several problems that companies often face. According to several field studies related to the retention rate of company employees.
These problems include:
- Toxic workplace: Based on the Real Estate Witch Great Resignation Survey , more than 30% of employees cite a toxic workplace as their main reason for leaving their workplace.
- Management : Data from the 2021 People Management Report shows that 60% of 2,000 employees resigned due to poor and inappropriate company management.
- Underappreciated : As many as 66% of company employees will submit their resignation unilaterally if they think their hard work is not appreciated or recognized by the company.
- Inappropriate salary : More than 60% of employees leave their jobs because they think that the wages they are given are not in accordance with their responsibilities and are looking for the best salary and benefits for their position at another company.
- Burnout : Based on a Deloitte survey of Gen Z and Millennials in the workplace. Opportunities to resign are quite large and are influenced by work-life balance imbalances and fatigue due to too much workload.
- Flexible work options : The 2020 pandemic changed the trend for work patterns to be more flexible. Companies that don’t follow this trend of flexible work tend to have a high chance of their employees leaving.
- Career growth : More than 60% of company employees say that their lack of opportunities for career growth has an impact on resignation. Then look for companies with high upward career mobility opportunities.
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How to Calculate Employee Retention Rate
Seeing the importance of the role of employee retention rates in managing the company. Naturally, the company’s management and HRD teams can calculate how well they are able to retain employees.
For this reason, there is a way to calculate the company’s employee retention rate, namely by comparing the number of employees at the beginning of a certain time period with the number of employees who are still there at the end of the period. The following are examples of formulas that you can use:
(Number of individual employees who survived the total time to the end of the measurement period)
__________________________________________________________________ x 100
(Number of individual employees at the beginning of the measurement period)
Case in point: If at the beginning of the year your employees numbered 500 people, then over time until the year-end period the remaining employees numbered 465 people. So the retention rate for that period is 465/500 x 100 = 93% .
Calculating the employee turnover rate will complement the retention rate by showing the percentage of separation over the same period. The formula for calculating it can use the following formula:
(Number of employees who left during the measurement period)
__________________________________________________________________ x 100
(Average number of employees at the time of measurement)
Case in point: If the average number of employees working for a company is 500 people, then during that time period there are 35 employees who resigned. Then the turnover rate for that period is 35/500 x 100 = 7% .
Calculating the retention rate with the employee turnover rate simultaneously is one of the best practices you can do. So you can measure accurately and precisely for planning your company’s employee retention strategy.
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5 Strategies for Managing Employee Retention
There are many strategies that you can apply in your company to be able to manage and even significantly increase employee retention.
However, among these there are some whose implementation can have a more effective and long-term impact.
The following are 5 employee retention management strategies, namely:
1. Invest in Employee Development
Employers who invest in their employees through providing opportunities to acquire new skills signify an important investment in the career growth of current and future employees.
Many employees tend to feel that satisfaction with the work environment is based on opportunities to develop their careers.
Opportunities for growth can include company paid workshops and conferences.
Employers may also offer reimbursement or scholarships to employees taking time off from study or those attending classes part time.
In addition, you can also arrange internal learning and development programs to guide employees according to their targets and goals.
2. Practice Open Communication
Currently, many companies have begun to prioritize and implement open communication between employees and levels of positions.
This can increase employee morale so that they get the freedom to speak freely but wisely and constructively.
That way, employees can share thoughts and ideas, deal with conflicts, and take part in the development of the company. Companies also need to ensure managers encourage transparent, respectful and open communication.
Open communication is beneficial for companies because it promotes trust. Once employees feel they can communicate freely about workplace-related issues, their level of satisfaction will increase.
3. Promoting Work Life Balance
Employees who work too much beyond their break time limit tend to lose focus which ultimately results in decreased performance.
Meanwhile, employees prefer to work in an environment where they can balance the world of work with their personal lives.
Thus, companies must ensure that the workload provided is in accordance with the employee’s rest time and personal life, or basically promotes a work-life balance work lifestyle .
It is the duty of company management and the HRD team to be able to promote healthy habits in employees so that they feel comfortable in carrying out their duties.
When employees can work a reasonable number of hours, they tend to be less stressed, which means better productivity and effectiveness.
4. Show Recognition and Appreciation
Employees play a significant role in increasing the company’s profits. Therefore, it is very important to make them feel valued and respected. Treating all employees in a fair manner is one way to do this. In addition, when employees do a good job, they should be recognized and encouraged to continue doing a good job.
While a simple thank you is a first step, good employers can include other important forms of appreciation such as a raise, bonus, job stipend, paid time off, or even a promotion.
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5. Offer a variety of competitive benefits
Benefits packages can include quality health insurance, life insurance, adequate sick and vacation leave, retirement plans, and family leave.
In addition, other benefits that companies can provide such as profit sharing shares, flexible scheduling, and other incentives such as child care, meal and transportation allowances, and gym membership are some of the significant benefits that can increase employee morale.
If company management doesn’t know specifically about what to provide, it’s a good idea to ask for feedback or conduct a survey to find out what employees need or want.
In addition, companies also need to consider options that can meet the needs of different demographics. For example, millennials and boomers are not motivated by benefits or the same way.