How to Calculate and Improve Your Employee Retention Rate
On average, businesses in the United Kingdom have an employee turnover rate of 15%.
Is your company’s number lower than this? If so, don’t assume you’re in the clear. There’s a little more that goes into calculating your retention and turnover rates and assessing your company culture.
Read on to learn how to calculate your company’s employee retention rate and how you can improve it if you’re not happy with what you see.
What Is Employee Retention?
Before we dive into the specifics of calculating your company’s employee retention rate, let’s define some terms, starting with employee retention.
Put simply, “employee retention” is all the practices a company implements to keep (or retain) as many employees as possible. Losing employees and replacing them with new ones is expensive, so the higher a company’s retention rate is, the better.
Employee turnover refers to the number of employees who leave a company during a specific period. In general, the lower a company’s turnover rate is, the better, because it indicates that employees are sticking around long-term.
Employee attrition is similar to employee turnover. However, it refers specifically to the loss of employees through natural processes, including:
⦁ Position elimination
⦁ Personal health reasons
Employee attrition also does not involve filling vacancies after an employee leaves. With employee turnover, though, the position is filled when someone leaves.
Why Does Your Employee Retention Rate Matter?
As we stated above, it’s expensive to replace an employee. In fact, on average in the UK, employee turnover costs roughly £11,000 per person.
High costs aren’t the only benefit to increasing your employee retention rate. The following are some other reasons why it matters:
Increased Employee Engagement
When you take steps to improve your company and make it a place where people want to stick around and work, you’re not only going to see better employee retention, but you’ll also see increased employee engagement.
If your employees enjoy their jobs enough to stick with them, especially during times when lots of companies are hiring, they’re probably going to be more invested and productive as well.
Improved Workplace Morale
You’ll likely notice an improvement in morale as your retention rate goes up.
If employees have a chance to get to know each other and build strong relationships, they’ll be happier at their jobs. This will likely be reflected in the quality of work they do.
Reduced Knowledge Loss
When your company is haemorrhaging employees, it’s also haemorrhaging knowledge. Each employee that you lose takes with them their extensive knowledge and unique skills that others may not be able to replicate.
If you want to avoid losing these assets (and what they bring to your company), you need to take steps to retain your team members.
Improved Recruiting Outcomes
When they’re searching for jobs, people tend to look into a company’s retention rate and turnover rate.
It doesn’t matter if you’re hiring graduates or seasoned professionals. If you have a low retention rate and high turnover rate, you may find that people are wary of working for you and are wondering why so many people are leaving.
Increased Company Revenue
Retaining employees and reducing turnover doesn’t just reduce expenses. It also helps to increase your company’s revenue and boosts its bottom line. If profitability is a priority, employee retention should be as well.
How to Calculate Your Employee Retention Rate
To determine your company’s employee retention rate, you first need to answer these two questions:
⦁ How many employees did you have at the start of a given period (quarter, year, etc.)?
⦁ How many employees did you have at the end of that period?
Divide the number of employees you still had at the end of the period by the number of employees you had at the beginning. Then, multiply this figure by 100. The end number will be your employee retention rate as a percentage.
How to Improve Employee Retention
Are you happy with your employee retention rate? Would you like it to be higher? If so, here are 5 tips that can help:
1. Improve Your Hiring Practices
A great employee retention rate starts with great hiring practices. Make sure you’re carefully vetting candidates and getting to know them before you decide whom to hire and reject.
The more you know about someone’s personality, skills, and experience, the easier it is to tell if they will be a good fit for your team. If they’re a good fit, they’re more likely to stay.
2. Provide Adequate and Ongoing Training
Employees are also more likely to stick with your company long-term if they receive adequate training right from the start. Take time to create a well-planned onboarding process that provides new team members with everything they need to know — and plenty of time to learn it.
Don’t let training stop with onboarding, either.
Provide ongoing training opportunities and chances for team members to upskill and further their careers. They’ll appreciate your investments in them and will often repay you with company loyalty.
3. Prioritise Communication
Prioritise communication throughout the company.
Managers should regularly communicate with their team members as well as higher-ups in the business. Team members should also be frequently encouraged to communicate with higher-ups and ask questions, share concerns, provide feedback, etc.
Open, multidirectional communication creates a positive, constructive company culture and improves morale throughout. This increases the likelihood that people will want to stay with your business and won’t jump ship at the first new job offer that comes their way.
4. Improve Your Benefits and Perks
If your employee retention rate isn’t where you’d like it to be, you may need to consider making some improvements to the benefits and perks you offer your team members.
What do you offer that separates your benefits package from your competitors? What kinds of perks can you provide that make your company a better place to work?
Seek feedback from your employees when asking these questions, too. Who better to learn from than the people who are already receiving benefits from you?
5. Encourage Work-Life Balance
Finally, do your best to encourage work-life balance for your employees.
Don’t demand that they work 12-hour days or be available during evenings and weekends. If you give them opportunities to recharge and do things they enjoy, they’ll come back to work refreshed and will be more engaged and invested in their projects and tasks.
You may want to consider offering flex-time or the option to work from home, too. This shows respect for each employee’s unique situation and helps them work when and where they’re most productive and focused.
Final Thoughts on Employee Retention
Are you ready to make some changes to your corporate culture so you can reduce your employee attrition rate, increase your retention rate, and set your company up for long-term success?
Follow the guidelines listed above and you’ll create a better work environment for everyone on your team, including new employees and members of Gen Z.
Do you need help replacing the employees who left your company before you took steps to improve your employee retention rate?
If so, post your job for free on our website. We make it easier than ever for businesses to hire qualified and early-career talent.