Employee retention has become a concern over a period of time as the rate of retention is declining rapidly and most of the companies are facing the issue of employee turnover. Employee retention is a phenomenon where various policies and practices are constructed so that valuable employees stick to the organisation for a longer period of time and does not seek for other opportunities. The opposite of employee retention is employee turnover, where employee leaves the job for various reasons. Organisations spend a lot of time and money in recruiting an employee and then again resources are being spent in training those same employees to make them fit in the organisation and at par with existing employees. After all this, if an employee leaves the job for any reason then the company faces huge loss and then again have to spend above resources on another new joinee.
Retention rate is the percentage of the employees that stay with the organisation at the end of the year. This helps you determine the profit of the company, where does your company stand and where to improve. The increased rate of retention amounts to higher profit and decreased retention rates amounts to lower profit at the end of year. Retention rate is calculated by counting the number of employees at the beginning of the financial year and number of employees (excluding new hires) continued to work till the end of the year.
Retention Rate = Number of employees stay at the end of the year × 100
Number of employees at the beginning of the year
Factors Causing Turnovers:
This is one of the common reasons that force a company to lose its valuable and responsible employee. Relocation includes changing of city or country due to medical or other personal reason or their spouse needs to relocate, then in this case retaining the employee becomes next to impossible and hence the only possible option remain is to leave the company.
- Disengaged and de-motivated employees
When employees does not acquire job satisfaction at the workplace due to negative work environment or the work does not match his/her skills and they do not see any personal growth then they become disengaged and their morale goes down. This leads to employee turnover and they start to search for other opportunities where their skills are valued and enhanced.
- Interpersonal issues at work
According to a research, 50% of the employees cite their mangers responsible for the turnovers. A negative influence at the workplace de-motivates the employees and this prevents them to give their best. People don’t leave jobs; they leave because of bad bosses and poor management. Sometimes, the employees face bullying, harassment, unfairness, misconduct from their supervisors which forces them to leave the job without any future plan and this leads to loss of valuable employees.
- Better Opportunities
Retaining employees is a difficult task as everyone in the marketplace look for better option. The need also arises when the employee is not satisfied at his/her current job and cannot see further growth out there, then they decide to look for alternatives where obviously the pay is higher and there is a scope for upgrading their skills.
The turnovers are not always bad for the company sometimes they are desirable which are termed as good turnovers. Good turnovers are when an employee is fired due to his/her misconduct at the workplace or when they do not contribute to the growth of the company due to lack of skills and they themselves leave the company. This saves the company on spending limited resources which can be invested on another valuable employee.
Advantages of Employee Retention
- Saves time of recruitment
Recruitment is not an easy job. It is a tedious and time consuming process that includes various steps to evaluate the skills of the candidate and whether they fit to the role of the organisation. If an employee leaves the company then again the recruiters have to conduct same process of hiring another employee to fill the space and this again requires a lot of time.
- Time and Cost of Training
After recruitment, the new joinee has to be provided with training to make him/her corporate fit and at par with the existing employees. Training procedures require lot of time and money which the company has to bear. Resignation of such employees causes great losses to the company, so it’s better to acquire policies to retain the employees for longer time to save the time and cost of training on another new employee.
Higher retention rate results in increase in profit of the company. When an employee stays longer with the company they know the value and principles on which the organisation works and they will deliver the same to the customers that will result in increase profitability. Retention also cost of recruitment and training that will ultimately cut the extra cost and adds to profit.
Retention helps in increase in productivity of the company. Employees that stay longer with the organisation are well versed with the work culture and policies of the company plus they are trained therefore making them contribute effectively and hence increases productivity.
Employee sticking longer with the organisation signifies that they enjoy working in the company and are satisfied with the benefits provided by them, which makes them loyal towards the organisation and a loyal employee can always go extra mile for the company.
Employee retention has become the crucial part in today’s scenario where the competition is tough and nowadays employee is more concerned about their growth and development rather than money so the companies should construct such policies that takes care of their up-gradation and recognition. As Richard Branson said, “Clients do not come first, employees come first. If you take care of your employees they will take care of the clients”.