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Why is Employee Retention Important

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 — January 13th, 2022

Why is Employee Retention Important

Employee retention is the organizational goal of keeping talented employees and reducing turnover. It is achieved by cultivating a positive company culture that shows appreciation to employees by providing them with a healthy work-life balance, competitive benefits, and opportunities for growth.

A study by Employee Benefits News on employee retention found that the average cost of losing an employee is 33% of their annual salary. This means when an employee decides to call it quits, a business hasn't just lost talent or time but valuable company funds.

The Ultimate Guide to Employee Retention

In the aftermath of COVID-19, where remote and hybrid working is fast becoming the new normal, workers have a wider range of potential employers to evaluate than ever before. In fact, a study by Work Institute predicts that 35% of employees may leave their jobs each year by 2023 for a better opportunity.

Now more than ever, organizations should be focused on building a strong retention strategy within their company. It is always more efficient for a business to retain a quality employee than to recruit, train and onboard a replacement worker of the same quality.

The importance of employee retention

Increased productivity

Tenured employees have higher levels of productivity and engagement because they have had time to develop their skill set, are capable of accomplishing tasks in less time, and are more committed to the success of the business. On average, it can take a new hire one to two years to reach the productivity levels of an existing employee.


Decreased hiring costs

According to a recent SHRM study, the average cost-per-hire is around $4,129, which can seriously add up for companies replacing numerous employees throughout the year. Things like hiring recruiters, training staff and advertising positions can add up fast. Companies can save money by investing in their current staff rather than looking for new candidates.

Increased employee loyalty

Loyalty tends to encourage employees to do their best work and perform to their highest standard. If a company has a loyal workforce, then they are going to have employees who work productively and efficiently.

Increased employee morale

A revolving door of employee hires and departures will have a significant impact on employee morale. Aside from lost connections and friendships, those workers who remain often have to take on the responsibilities and workloads of those who have left.

This not only creates a loss of morale among employees but will impact their levels of motivation and satisfaction. High employee morale is important because it reduces absenteeism, lessens stress, and decreases the amount of paid leave an employee takes.

Employee retention strategies

Build employee engagement

According to Gallup’s State of the American Workplace report ‘employees who are engaged are more likely to stay with their organization, reducing overall turnover and the costs associated with it.’ Furthermore, research indicated that 92% of business executives believe that engaged employees perform better, boosting the success of their teams and the outcomes of their business.

Tips for improving employee engagement:

  • Recognize and reward employees
  • Conduct employee engagement surveys
  • Promote healthy work habits
  • Regularly share feedback
  • Train employees to succeed in their role and beyond
  • Focus on onboarding
  • Create a supportive culture


Build a culture people want to be part of

Glassdoor found that as many as 77% of workers consider a company’s culture before sending in a job application and nearly half of employees would leave their current job for a lower-paying one at an organization with a better culture, reports Associated Press.

Tips for building company culture

  • Define company values
  • Be authentic
  • Encourage a healthy work-life balance
  • Remind employees that their work matters
  • Create opportunities for employees to build relationships
  • Ask employees for their input

The Ultimate Guide to Internal Communications Strategy

Recognize and reward employees

Rewarding and recognizing employees leads to greater employee engagement, which in turn increases retention and creates a more positive workplace for all. When employees feel appreciated and recognized for the work they do, they will be more connected to their work, their team, and your organization as a whole.

Ways to recognize and reward employees

  • Make a personalized employee recognition certificate
  • Give positive feedback in meetings
  • Use employee feedback tools
  • Take your team out and share a meal
  • Let employees take an extra day off
  • Give out company merchandize
  • Make a charitable donation on the employee’s behalf
  • Offer praise in the company newsletter
  • Hand out a company trophy
  • Schedule a team community service project

Prevent burnout by focusing on employee wellness

Mayo Clinic defines burnout as a special type of work-related stress - a state of physical or emotional exhaustion that also involves a sense of reduced accomplishment and loss of personal identity. Employee burnout is a major issue in the United States with 76% of employees experiencing burnout on the job.

Tips for preventing employee burnout

  • Monitor workloads and scheduling
  • Encourage employees to use vacation time
  • Provide work from home opportunities
  • Prioritize work life balance
  • Offer employee assistance programs
  • Enforce management training

Recruit the right employees

Recruiting and hiring the right employees requires time, energy, and resources but has excellent benefits for organizations willing to make the effort. Finding the best candidate for the available role will save valuable time in training, preserve the efficiency of the company and reduce the organization's turnover rate.

Tips for recruiting the right employees

  • Create detailed job descriptions
  • Prepare well structured interviews
  • Ask for references
  • Look beyond the CV
  • Implement a skills test
  • Enlist the help of a recruiter


Key Takeaway

Businesses should never underestimate the importance of employee retention. Being able to retain their best employees is a key factor in determining whether a business will be successful. Every time a worker leaves, employers are forced to dedicate time and resources to recruiting, onboarding and training a new hire. At the same time, the company will suffer internally while the role remains unfilled.


Furthermore, losing a talented employee can be a big blow to an organization’s morale, productivity, and budget. It’s for these reasons that employers must understand how important employee retention is to their business and why it’s crucial to implement strong retention strategies from the get-go.


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