What Causes Low Employee Retention Rates [+ How to Fix!]

To create an effective and long-lasting team of dedicated workers, you must first understand what causes low employee retention rates.

Retaining employees is vital to the success of any organisation. Efficiency comes from an experienced quality team familiar with both the business and one another.

When employees decide to make their careers with you, they bring their knowledge of your audience and processes with them on their climb up the proverbial ladder.

When you keep the employee retention rate high, you save on hiring costs and precious training time. You create a workforce that rarely has to slow down to let a new person catch up.

But when you’re constantly losing and replacing team members, you’re stuck paying out the nose to recruiters and hiring agencies repeatedly.

The average cost of hiring can add up to a considerable amount. This expense ultimately eats into profits and moves the goalposts for success.

So, how can you make sure your employees want to stick around?

The first step is identifying what causes low retention rates. Then, you must learn how to avoid and fix those mistakes within your organisation.

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In this article, we’ll explore several common mistakes businesses like yours make that cause employees to abandon ship. Then we’ll give you actionable advice on how to fix them.

Low compensation

Compensation is a huge sticking point for a lot of full-time employees. Earning a liveable wage is one of the driving forces behind every career. These people must provide for their families and can only do so when paid fairly.

Paying employees below the industry average for their positions can make them feel as though they’re undervalued. It tells the team member your business and you, by extension, don’t appreciate their work.

Low or unfair wages will cause your employees to look for opportunities elsewhere. If one of your major competitors happens to be paying at or above the industry standard, that’s where their ongoing job search will start.

By failing to meet this basic need, you’re‌ helping competitors build the long-term efficient team you want. You’re working against yourself when you fail to pay a liveable wage.

The best way to combat this issue would be to pay your employees more.

This initiative might mean having a smaller team than you initially hoped for. But a smaller team of well-paid, long-lasting professionals will be more beneficial to your business than a huge team of cheap labour new hires.

When people earn more, they’re more invested in keeping their positions. They do better work, there’s less turnover, and company morale and culture better maintains its peak.

If you can’t offer higher wages, consider offering perks with some value.

For example, an extra week of vacation time or using a company expense card could sweeten the deal for unhappy team members.

You could also offer to let team members work remotely for a few days every week. Make sure you know how to manage remote teams to keep your company productive.

Poor employee benefits

After wages, the next most crucial factor for quality employee retention is benefit packages. These benefits include health insurance, retirement plans, life insurance, pet insurance, and more.

A failure to offer these benefits is a huge mistake driving your retention rate into the mud. It’s especially true if you’re operating in the United States, where government-funded healthcare doesn’t exist.

With the rising cost of healthcare and pharmaceuticals, employees need coverage from their employers. If you don’t offer it, they’ll go to a company that will.

Another major mistake leading to low employee retention is providing costly benefits or healthcare plans that don’t offer quality care.

To fix this issue, put some time and effort into choosing the right benefits options for your employees. There should be several different plans to choose from. You must also make sure the plans you present are affordable for employees.

Don’t jump at the first benefits package you see. Do your homework and slowly gather information. Compare offers from many insurance firms.

Put time and effort into this decision. It could be the deciding factor for an employee to stick with you.

Lack of employee engagement

Low employee retention rates can come from ineffective communication and employee engagement within the company culture.

Employees may feel unheard or disengaged without a platform to voice their concerns and provide regular feedback.

However, with platforms like Workday Peakon Employee Voice, organisations can address this issue head-on.

By leveraging the power of real-time employee feedback and forecasting employee turnover, companies can gain valuable insights to identify and rectify areas of concern. To fully harness the benefits of this integrated solution, companies should partner with reliable Workday consulting services.

These consulting services provide expert guidance and support in implementing and optimising Workday solutions. That guarantees organisations maximise their employee engagement efforts and ultimately improve retention rates.

Talk to the members of your team. Let them know they have a voice and employee satisfaction matters to you. Ask for feedback, and give employees the credit they deserve when you implement a suggestion. The result is team members who feel engaged and appreciated.

Those are the kinds of employees with high job satisfaction who’ll stick by a company for years.

Toxic management styles

If you notice your employee turnover rate is rising, there may be an issue in the chain of command. Never tolerate toxic management styles. They can drive valuable team members away and into the arms of a competitor.

What do we mean by toxic management styles?

Toxic management typically speaks to managers who are overly negative or hostile. It could also mean there are some ethical issues in the workplace. Toxic management is terrible for employee morale.

Toxicity could include;

  • Yelling;
  • Having unrealistic expectations;
  • Sexual harassment;
  • Inappropriate jokes;
  • Spreading gossip;
  • Bullying;
  • Lack of accountability, and;
  • Micromanaging.

You can avoid this issue by making sure to train your managers the right way. If you want them to perform to your expectations, you’ll need to clarify those expectations.

Create a management guide laying out the management style you expect from your team leaders and make sure they stick to it. You should let employees know they can come to higher-ups about issues with management without fear of reprisal.

If you find you have managers driving team members away with toxic leadership, dismiss them immediately. Let the team know you’re taking steps to guarantee nothing like this ever happens again.

Do your best to reassure team members and keep them from seeking employment elsewhere.

Lack of growth opportunity

If you want employees to remain with your organisation for a long period of time, then you need to make sure there are incentives in place. You should have a promotion track employees can set themselves on.

This creates growth opportunities for them. Advancement is a huge selling point for new hires. It gives them a goal to strive toward. The lure of more money, authority, and responsibility can keep team members with your company.

When you need to hire someone for a management position, promote from within. If you go for an outside hire over someone from within the organisation, employees will start to feel a glass ceiling over their heads.

Additionally, promoting from within gives you a manager who knows your company. They start already knowing your team and can hit the ground running with new responsibilities. It’s a win-win situation.

Businesses that don’t prioritise professional development are a shortstop for most employees. It’s not a place to lay roots down. Once they identify advancement opportunities elsewhere, you’ll lose the team member. It’s even likely they’ll work for one of your direct competitors.

Little to no employee appreciation

Employees need to know they’re appreciated if they’re going to stick around. When there’s no acknowledgment from management, it’s easy to feel like you’re getting taken advantage of.

That’s why recognition and appreciation for solid work are crucial. It could be something like an employee of the month award with their portrait photo placed in a pre-designed custom frame and their name engraved below. These awards go well together with special perks for that month like a small bonus, free lunch or extra day offs.

It could also be special public recognition for going above and beyond the call of duty in front of the entire team. Even an email going out company-wide praising the efforts of team members who have gone the extra mile can make someone feel appreciated.

Take your team out for lunch regularly. This generous act gives the workers time to bond with one another while also helping them feel appreciated by management.

These steps ultimately inspire loyalty, which leads to higher employee retention. A loyal employee might even turn down more money elsewhere to stay with your company for a prolonged time period.

Improper training

Another common reason for low employee retention rates is the organisation’s need for clearer roles and responsibilities.

Employees shouldn’t need clarification about what to do, who they report to, and their goals. They may feel frustrated, demotivated, and unappreciated.

For example, in some companies, there may be confusion between the roles of product owner vs. product manager. These roles have different scopes, skills, and deliverables.

They also may overlap or conflict in some confusing areas.

To avoid this problem, it’s important to clearly and regularly define and communicate each team member’s roles and responsibilities.

You should cover this in the initial employee training period. Create a training guidebook guaranteeing everyone trains ‌the same way. You won’t lose employee productivity or create confusion with a lack of preparation or knowledge.

When trying to figure out what causes low employee retention rates, one can often point to frustration in the workplace. Improper training can lead to dangerous frustration.

Hiring the wrong people

If you’re not hiring the right people, the quality employees you do have will become disillusioned and leave.

When you bring on a large percentage of team members unqualified for their positions, your quality employees will get frustrated.

Never force outstanding employees to pick up the slack from underperformers. This mistake breeds resentment. Those quality employees will start to look for gameful employment elsewhere.

Then you’ll only have subpar team members, and the entire organisation will suffer.

You can avoid this costly mistake by sticking to a well-thought-out hiring process. This document should guide your hiring manager, helping them select the type of person needed for every position.

For example, if you’re looking for a Website designer, you’ll want someone with at least a bachelor’s degree in web design. Hiring someone with no employee experience or degree will only place more of a burden on everyone else and drive them away in droves.

Overworking employees

Your team must be able to maintain a work-life balance. When expectations are too high, and workloads are too heavy, you risk alienating quality workers.

What’s more, overworking is bad for employee health. They’ll search for a job with more time off and reasonable deadlines.

It can be easy to overwork your employees. You have your eye on profit margins and deliverables. But you need to keep your expectations reasonable to improve employee satisfaction.

That means avoiding unreasonable deadlines. It also speaks to not expecting employees to answer emails and phone calls during their off hours. Dissuade them from coming in early or staying late to meet expectations.

Not knowing what causes low employee retention

Of course, one of the major issues impacting your retention rate is not knowing what causes low employee retention. Thankfully, this article has given you a solid idea of what employees expect and how to keep a solid and efficient team from leaving. But there could be other unforeseen issues to watch out for.

Keep your eyes and ears open and interview employees who resign. Find out why they felt the need to go elsewhere and use those insights to implement changes to your employee retention strategies.

In Summary

Employee retention can improve your profits and efficiency‌. But to avoid involuntary turnover and keep your employees for a long period of time, you must avoid the issues we’ve highlighted above.

To increase your employee retention rate, make sure you’re;

  • Paying a fair annual salary;
  • Providing benefits;
  • Engaging your employees;
  • Avoiding toxic management styles;
  • Creating growth opportunities;
  • Showing appreciation for team members;
  • Training employees the right way;
  • Hiring the right people;
  • Promoting a healthy work-life balance, and;
  • Understanding why employees are resigning and making changes.

If you follow the instructions in this guide, you can keep employees happy and create a loyal, longstanding, and highly proficient team.

About the Author

Vikas Kalwani is a product-led growth hacker and B2B Marketing Specialist skilled in SEO, Content Marketing, and Social Media Marketing. He works at uSERP and is a mentor at 500 Startups.

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