Unlocking Business Growth: The 10 Benefits of Employee Retention
17 January 2025
Employee retention is an ongoing theme for employers and HR professionals, and for good reason. We’re in a tight labour market; recruiting fresh talent is expensive, and it eats into business profits. It’s more cost-effective to invest in employee retention strategies than it is to attract, onboard and train new starters. High employee turnover rates are a financial risk, impacting your bottom line. During this blog, we’ll explore why employee retention matters and how to create a successful employee retention strategy.
Summary:
Are you at high risk of high employee turnover?
How to Calculate Employee Retention Rate
10 Benefits of Employee Retention
Negative Impacts of Low Employee Retention
Who is Responsible for Employee Retention?
How to Increase Employee Retention
Employee Retention Strategies That Work
Unlock Business Growth and Boost Employee Retention with Pluxee UK
Are You at Risk of High Employee Turnover?
We interviewed over 1,000 UK employees and found that almost half would be looking for a new role. Using our exclusive data, we’ve created a Retention Risk Assessment calculator. Answer just three questions, and we’ll reveal your employer turnover risk. It’s a free test that will only take a few minutes of your time and could save your company a considerable amount.
How to Calculate Employee Retention Rates
You can calculate your employee retention rate in just a few steps, giving you a benchmark. From there, you can set the KPIs you aim to meet.
- Step 1: Define a period to review (one year as a minimum).
- Step 2: Define the total number of employees at the start of that period.
- Step 3: Identify the number of employees who left during that period.
- Step 4: Deduct the leavers from the original number, leaving you with the total number of employers who remained with you throughout that period.
- Step 5: Divide the number of original employees by the total number of employees in your business at the end of the period, and that's your retention rate.
- Step 6: Your final number is a decimal. Multiply it by 100 to reveal your employee retention percentage.
Identify your retention rate over several years, using the data to see whether a pattern is emerging and what steps you need to take.
10 Benefits of Employee Retention
So, why is employee retention a hot topic and consistently a priority for HR? Here are ten reasons why retaining your talent should be at the top of your agenda.
1. Reducing Recruitment Costs
The more employees you need to replace, the more you’ll spend on recruitment - and it isn’t cheap. Research suggests it can cost over £30,000 every time you recruit and onboard a new employee. You’re not just paying recruitment fees but also investing in time and training. Let’s not forget that we’re in a tight labour market, and talent bidding wars also add to that bill.
There will always be reasons for needing to fill a role, but high levels of employee retention will significantly reduce your recruitment costs.
2. Increased Productivity
When your employees know their roles and your business inside and out, they’re more productive. New recruits must learn your ways of working, products and industry, so it takes time for them to get up to full speed. Being able to retain your talent also suggests you’re doing something right and your employees bring their best selves to work.
3. Higher Employee Engagement
As mentioned above, if your retention levels are good, it’s because your employees want to be there. You should still be mindful of unengaged and disengaged employees who may stay with a business without feelings of loyalty. Still, happy employees are often more engaged and loyal, have higher morale and are more motivated to see your business succeed.
4. Positive Workplace Culture
Some of the best friendships develop in the workplace, especially among colleagues who’ve been working together for many years. Continuity, familiarity - knowing how to communicate effectively with the people around you helps create a positive workplace culture.
High employee turnover negatively impacts workplace culture due to the added pressure it puts on colleagues needing to cover a role or provide training. It can also be disconcerting - even concerning - when people consistently choose not to stay.
5. Knowledge and Skills Retention
While new talent brings fresh perspective and innovation, you cannot put the price on the depth of knowledge long-standing employees will have of your business. Consider also the time, money and energy put into developing your employees’ skills. Why risk another business benefiting from your efforts?
6. Improve Employee Satisfaction
Job satisfaction has a role to play in motivation, engagement and productivity. A company with good levels of staff retention will likely score high in an employee satisfaction survey. When turnover is high, stress levels may rise while other employees cover extra tasks, negatively impacting job satisfaction. The more unsatisfied employees are, the higher the risk of additional turnover.
7. Attract Top Talent
High levels of employee retention are a green flag for a candidate considering joining your business. It tells them your company is a place people choose to remain, and this is attractive to top talent. People want to join a business where they feel valued, where their happiness and wellbeing matter. Your ability to retain employees tells them they can expect this from you.
8. Better Employee Wellbeing
Companies with high employee turnover will often report high levels of stress and absenteeism. When people leave, their colleagues may expect to take on additional workload until you fill the role. However, if this happens consistently, or you ask them to absorb the extra workload for too long, it puts their wellbeing at risk. A full squad, where everyone plays their role and offers support when necessary, will reduce workplace stress and enhance employee wellbeing.
9. Enhanced Client Satisfaction
Clients also appreciate continuity. It’s disruptive for them when their point of contact changes too often because of turnover. It’s also a red flag, suggesting to them that all may not be well. Ease of doing business and trust form part of the decision-making process when a client comes to the point of renewing contracts. Retaining your people helps you deliver the best service, enhancing client satisfaction and helping your business thrive.
10. More Desirable to New Business
ESG and CSR are coming to the forefront of business. Your policies and values come under scrutiny, and employers who can boast their credentials as an employer of choice or a great workplace are desirable.
Negative Impacts of Low Employee Retention
Flip around the ten points listed above, and you’ll understand the negative impact of low employee retention. High employee turnover leads to a higher recruitment budget, reduced productivity, lower employee engagement, loss of knowledge, lower satisfaction, challenges in recruiting fresh talent, poor employee wellbeing, dissatisfied clients, and difficulties acquiring new business.
All of this negatively impacts your bottom line and the ability for sustainable growth in the future, which is why employee retention is important.
Who is Responsible for Employee Retention?
Everyone in a business has a role to play in employee retention since every person is involved in creating the culture and employee experience.
Managers and Leaders
The buck always stops at the top. Leaders must lead by example, and managers must be empathetic and well-trained. Employees most frequently cite poor management as the reason they leave a business. Ensuring managers receive leadership training is vital, especially if promoted from another non-management role.
Talent Management & Recruitment Team
The hiring process is a fine art. Finding the right blend of a candidate who meets the skills criteria and is a good cultural fit can be challenging. Both are important. A person may have all the skills needed to do a role on paper, but there’s more to recruitment than ticking a box. Just as job seekers want an employer who aligns with their values, the talent management and recruitment team must also select people who bring the right energy and ethos with them.
HR
HR are people managers, upholding the company standards while ensuring they follow regulations. While they may not be involved in day-to-day challenges and conversations, they are a point of escalation should issues arise. How they approach these challenges within the workplace, the support they offer, and the resolution they conclude could determine whether an employee stays with you.
How to Increase Employee Retention
When it comes to retaining employees, there’s no one-fits-all solution, nor is there just one area to focus on. Use data to make decisions and learn what matters most to your employees. Understanding how they feel about your business will help you understand your company culture and work environment, allowing you to define what employee retention strategies are most likely to improve your retention rates.
Employee Retention Strategies That Work
There may be no one-size-fits-all solution, but experience and data tell us specific factors make up effective employee retention strategies.
Creating a Positive Workplace Culture
Values matter. Your work environment and company culture all play a role in employee retention. An effective way of improving employee retention is by clearly communicating your values when the employee experience begins - at the recruitment stage. Ensuring new recruits align with your values and mission will help to reduce employee turnover.
Prioritising CSR and ESG
Social values and social responsibility are essential to employee retention strategies, especially among specific generations.
In our blog, ‘Cycle to Work: The Socially Conscious Employer’, we share that Millennials will make up 75% of the global workforce by 2025 - this year - and they want their employers to be socially responsible. 93% of employees believe companies must lead with purpose, and 90% of employees who work at companies with a strong sense of purpose say they’re more inspired, motivated, and loyal.
It’s not just Millennials who’re focusing on values. Gen Z is continuing to beat the drum and champion equality and CSR. 64% of young people don’t think the government is doing enough to avoid a climate crisis and expect their employers to act responsibly.
Adopting Flexibility and Work-Life Balance
A work-life balance is so essential for employee retention that we’ve dedicated an entire blog to it - The importance of work-life balance & how employers can enhance it.
30% of workers would give up part of their pay for a better work-life balance!
Flexibility is no longer a nice-to-have; it’s a must-have. 54% of workers worldwide would consider quitting their jobs if they’re not given some form of flexibility in where and when they work. Read more about this in our blog, ‘You're Ready to Boost Employee Engagement & Become an Employer of Choice’.
Embedding a Reward and Recognition Programme
68% of UK employees would consider quitting their jobs if they do not receive a year-end bonus (HR Review).
Your people expect you'll reward them for their efforts, but many businesses struggle to issue bonuses in the current economic climate. Whilst this appears to be a dealbreaker for 68% of UK employees, others will understand that there are broader financial constraints if communicated effectively.
Communication is essential, but so too is consistent reward. One-off bonuses aren't always cost-effective, but they’re not the only way to enhance employee engagement and show your people you recognise and value their worth.
Cost-Effective Rewards
Our eVoucher solutions are an inclusive and affordable way to reward and celebrate your employees. Use them to acknowledge high performance, milestones, or just because!
- Inclusive: With over 150 high street and high-end brands to spend with.
- Cost-effective: We only bill you for eVoucher Cheques when your employees redeem them.
- Eco-friendly: Digitally delivered, there’s no need for paper or plastic!
Giving employees the freedom to choose how to spend their rewards makes a significant difference.
Offering Career Development Opportunities
87% of Millennials prioritise development and career progression opportunities, and 89% believe it’s essential to be constantly learning. Job satisfaction impacts employee retention, and employees want an employer with whom they can develop and grow.
Development opportunities play a fundamental role in motivating employees, and we’ve dedicated a blog to the topic: How Maslow's Hierarchy of Needs can transform your employee engagement strategy.
Learning from Exit Interviews
People will leave even when you implement the most robust and impactful employee retention strategies. It’s not always personal. Lives change, and people may take you by surprise, deciding to embark on a new adventure or pursue a new direction entirely.
What’s important is understanding why your employees are moving on and whether it’s due to matters within your organisation that you should improve. Ensure your exit interviews allow for honest and constructive feedback to enable you to gather the most valuable data.
Embedding a Comprehensive Employee Benefits Package
We tackle the role of employee benefits in depth in our blog, ‘Everything you need to know about employee benefits.’ 71% of employees review their current benefits when considering whether to stay with or leave a business. An attractive and supportive employee benefits package = increased employee retention!
There’s no one-size-fits-all when it comes to employee benefits. They require strategic thinking and must include financial, mental, and physical wellbeing solutions.
During our blog, ‘Retaining skills & reducing employee turnover in 2024 & beyond!’ we review the data that powers our Retention Risk Assessment, sharing that 36.93% of our employee respondents said better financial benefits would persuade them to stay with their current employer.
Financial Wellbeing Benefits
Reduce financial anxiety and stretch salaries further with our range of financial wellbeing benefits.
- Employee Discounts: Up to 20% discounts with the brands your employees love.
- Pluxee Card: Up to 15% cashback on everyday essentials.
- Financial Wellbeing App: Help employees budget, save, and consolidate loans and debt.
- Green Car Scheme: Tax and NIC savings for employer and employee.
- SmartPay: Helping employees avoid credit cards and loans through salary deductions.
- Refurbished Tech: Buy, sell, or trade in wanted tech.
Health and Wellbeing Benefits
Burnout and excess stress increase absenteeism and employee turnover. Here are a few ways we can help you enhance employee physical and mental health…
- Employee Assistance Programme: Access to counsellors and support 24/7, 365 days a year.
- Mental Wellbeing App: Crisis support at the touch of a button.
- Annual Leave Purchase Scheme: Promoting a healthy work-life balance and reducing your wage bill.
- Cycle to Work Scheme: Encouraging a healthier commute and tax and NIC savings for employer and employee.
- Gym & Fitness Discounts: Making exercise affordable.
- Online GP: A digital health platform that helps employees get medical help faster.
Unlock Business Growth and Boost Employee Retention with Pluxee UK
We agree that there’s a lot involved in retaining employees and that employee retention strategies must include multiple elements to be effective. Another aspect of your success is having a trusted partner who understands your business needs and will work with you to achieve them.
We’re proud to partner with clients on their journey to sustainable growth, making work more than a place to be… a place to belong.
Sources: Cendex, Money, HR Review, HR Review, Omnipresent Group.
