If you’ve been tuned in to labor market discourse over the past 18 months, you’ve probably heard rumblings about the mounting challenges around attracting and retaining workers. But there’s a difference between hearing about the pandemic’s widespread impact on the U.S. labor market and seeing the numbers to back it up.
An August 2021 survey of North American employers shows us just that. According to the Willis Towers Watson survey, 73% of employers are currently struggling to attract employees. That number has risen sharply over the past year: Only 26% of employers said the same thing in 2020, but that figure had more than doubled by the first half of 2021. As we hurtle toward 2022, 70% of employers expect the problem to persist into the new year.
However, getting people through the door is only half the battle. The same survey discovered that employee retention has also proved problematic. More than 60% of employers say they struggle to keep employees around, and roughly the same percentage expect this problem to follow them into 2022. To put that number into perspective, only 15% of employers reported workplace retention problems in 2020.
Employers aren’t taking this lightly. In a highly competitive environment where everyone is fishing from the same small talent pool, many employers are working to improve employee attraction and retention. We’ll explore many of those steps in this post — and how effective they are — but first, let’s explore why employee retention is important.
Why Is Employee Retention Important?
When a company’s best competitive advantage is its people, it’s easy to see why attracting and retaining top talent is valuable. While high employee retention can help increase your profits by up to four times, gaps in skills and talent put a strain on your future growth. The cost of continued employee turnover can also chip away at your bottom line.
Replacing even one employee can cost you up to nine months’ worth of that employee’s salary. If that employee were making $60,000 a year before exiting your company, that means you would spend upward of $45,000 recruiting, onboarding, and training their replacement. How could that possibly be? Turnover comes with a bunch of indirect costs, including:
- When someone leaves your company, they take their institutional knowledge with them. Imparting that wisdom on a new hire takes time and resources.
- Only 30% of businesses are able to fill a vacant role within 30 days; the other 70% take anywhere from one to four months.
- Your new hire isn’t going to be fully productive at first. In fact, it will probably take them eight months to reach full capacity.
In just nine years’ time, the U.S. is expected to lose $430 billion a year due to poor workplace retention. It’s no wonder that 87% of HR specialists count employee retention among their top priorities.
How to Improve Employee Retention
You might be trying to craft an employee retention strategy, but it’s important to understand what you’re up against. After all, we’re seeing more people explore new job opportunities. In August, almost two-thirds of American workers were actively looking for new jobs (up from just 36% in May), according to a PwC survey. The same study discovered that Hispanic (82%) and Black (67%) workers were more likely to be job hunting than white (57%) workers; and while some industries (like finance) had already hit their turnover peak, others (like technology) were still trending upward.
Every organization is unique, so what your employees value might differ from what’s important to the employees of another organization. As you craft an employee retention strategy, research shows you should focus on these four factors that influence employee decisions about whether to stay with an employer long term.
There’s no shortage of research confirming the importance of comprehensive benefits packages. One survey discovered that 21% of employees were leaving their current employer because they wanted better benefit options. Another found that 41% of employees would accept a slightly lower salary if their employer offered a hybrid remote working model. And when studying which benefits increased employee satisfaction the most, Glassdoor found that health insurance, paid time off, and retirement plans were among the top contenders.
Most employers are receiving the message loud and clear. It’s why so many are permanently revising their benefits to boost talent attraction and workplace retention, according to the 2021 Willis Towers Watson survey mentioned earlier. To increase attraction, more than half of employers said they are focusing on enhancing the employee experience, while 61% are offering more flexibility. To improve employee retention, 70% are expanding flexible work arrangements; 65% are providing educational opportunities through tuition reimbursement.
With so many employers offering more competitive benefits, you should take extra steps to keep yours above industry standards while reviewing them annually. For instance, you might not be in a position to offer tuition reimbursement at the moment. But that could change in the next year, and providing benefits that your employees can't access by themselves helps you hire better employees and retain them.
You also need to educate your employees about the cost and value of their benefits. The benefits you offer have a monetary value; when employees know that value, they might be more willing to accept a lower-than-expected salary. Talking in detail about the benefits you offer not only demonstrates how you value employee health and well-being, but it also helps employees maximize those benefits.
For instance, high-deductible health plans might sound scary for those who don’t feel they have the cash on hand. When cash-strapped individuals cannot afford steep out-of-pocket medical expenses, many are often forced to turn to payday loans or not get the care they desperately need. Paytient Health Payment Accounts (HPAs) enable employees to pay for these expenses over time via payroll deducted, interest-free payments — with the ability to link to HSAs, FSAs, or bank accounts.
It’s your job as the employer to educate employees on their benefits and how to make the most out of their offerings, such as HSAs. There are other ways employers can help employees cover the costs of high-deductible health plans, though. Paytient can be used alongside HSAs to allow those accounts to grow over time, enabling people to keep more cash on hand in case of an emergency, cover potential large claims in the future, and even save for retirement.
Organizational culture has been having a moment over the past decade. In a pre-pandemic survey of adult workers across both the U.S. and Europe, good company culture was ranked above higher salary when evaluating potential employers. Although COVID-19 was in many ways a catalyst for reinventing the workplace, it did not squash the importance of company culture with regard to attracting talent and retaining employees.
But why is organizational culture so vital to talent attraction and retention? Simply put, it’s a fundamental piece of the hiring equation. Quality hires are less likely to quit and are more likely to thrive long term (meaning your turnover rate will be lower, which saves you time and money).
Beyond that, using a talent-attraction strategy that speaks to your culture also makes employees more likely to show higher levels of engagement. Engaged employees are more likely to refer friends to your organization, and 71% of job seekers say they use referrals from current employees of organizations to evaluate job openings.
It makes sense why talented people seek out organizations with positive, cohesive cultures: We spend almost one-third of our lives at work, and we want to enjoy it. When you have a strong organizational culture, your employees will be proud to declare your company a fantastic place to work. That stamp of approval will naturally attract like-minded individuals who want to work somewhere special.
3. Diversity, Equity, and Inclusion
Embedding diversity, equity, and inclusion (DEI) in their workplace cultures was one of the first employer steps mentioned in the 2021 Willis Towers Watson survey — and for good reason. Employees are demanding it. In April, CNBC reported the results of a survey it conducted in partnership with SurveyMonkey: About 80% of surveyed workers said they want their employers to prioritize DEI efforts.
Among the employers surveyed by Willis Towers Watson, 91% said they expect their broader emphasis on DEI in talent attraction to become a permanent fixture in the organization; nearly the same percentage felt similarly about their DEI-focused employee retention strategies. This is a smart move in light of how important DEI is to employee satisfaction.
According to Laura Wronski, a research science manager at SurveyMonkey, “Workers who are satisfied with their company’s efforts on [DEI] issues are actually happier with their jobs. They are more likely than others to say that they have good opportunities to advance their careers, and they are more likely to feel like they are paid well for the work they do.”
One meaningful way you can embed DEI into the fabric of your organization is to offer the same benefit opportunities to all of your employees. Holding space for a more diverse group of employees means that you will also encounter more varied healthcare needs. Taking a one-size-fits-all approach to health insurance will only intensify existing health disparities among workers.
By pairing services like Paytient with your existing benefits package, you can help keep your employees physically, mentally, and financially healthy because they won’t have to turn to predatory lending to fund healthcare expenses. Using Paytient, employees can access funds to pay medical, dental, pharmacy, vision, or veterinary bills, which is critical to keeping your employees focused and performing at their best.
4. Appreciation and Acknowledgement
The simplest strategies are some of the most effective, which is certainly true for employee retention strategies. Keeping your employees around for the long haul doesn’t have to involve a series of exorbitant awards. Often, it boils down to recognizing and appreciating your employees for a job well done.
Consider that nearly two-thirds of employees whose hard work is regularly acknowledged are unlikely to look for a new job. Recognizing your workers — both publicly and privately — imparts a sense of belonging and purpose. Employees want to see how the work they do every day contributes to the company’s greater success!
Recognition should go beyond a simple thank-you email, however. You can continue to show your employees how much you value them by providing resources for living more balanced, full lives.
If workplace burnout has historically been an issue at your organization, for instance, you’ve probably experienced workplace retention problems. Show your employees that you support them as multidimensional beings who sometimes need breaks by offering no-questions-asked PTO. You can also fill in existing holes in your well-being benefits package by using Paytient to help cover mental health care costs.
During these times of labor and skills shortages, organizations are competing for a much smaller talent pool. How can you ensure your business stands out from the crowd? Ultimately, it comes down to the benefits you offer your employees. It’s what will make the difference between a short-term worker and a lifelong employee.