You’ve clicked on this guide because you run a small business and want to know how to save money. That is much simpler than it seems, and this one tactic/idea will help you save a fortune. Employee retention is the secret to saving money for every small business.
What is employee retention?
When you hire employees to work for you, you need to keep them at your business for as long as possible. This means you are retaining them, which is what employee retention is all about. Effectively, your employee retention rate is a percentage of employees that stay at your business over a period. You can measure this every year and it will give you a good indication of how many people are hired and then leave your company… the staff turnover rate.
Why will employee retention help you save money?
Okay, so where’s the correlation? How will you save money by retaining your employees – it doesn’t seem to make sense!? Well, there are a couple of key points to go over. One of these points is a new one that’s only come about since the start of the pandemic.
The government has introduced something called Employee Retention Tax Credit, which is basically a grant that rewards you for retaining your employees. If you kept your employees during the pandemic and continued to pay their salaries, you can basically claim back up to $26,000 per employee.
It’s worth getting some ERC tax credit help to understand just what you can do, and how much your business can save. You can use the money claimed back however you want, which can be fantastic for your company.
But, how does employee retention save money outside of the pandemic?
To understand this, you have to look at the opposite of retaining employees. Whenever you lose an employee, you will have turnover costs. This is the cost of letting an employee go, combined with the cost of hiring someone new. Nobody can accurately calculate the expenses of turnover, but some conservative estimates suggest it’s around 25% of an employee’s salary.
Clearly, the more employees you lose, the more money your business also loses. What’s worse is that this money is basically good for nothing. It’s not an investment – it’s an unnecessary cost for your business to deal with.
Furthermore, consider what else you lose when employees no longer work for you. You lose their expertise and knowledge of working for your company. You have to get someone else in and spend time training them and waiting for them to get up to speed.
It can mean you lose weeks or months of productive days because you no longer have the old employee working. As a result, the money you can lose by missing out on business opportunities is insurmountable.
This is often something business owners forget about when it comes to employee retention. Sure, you’re aware that the turnover costs can be substantial, but you neglect the wider impact this has on your organization.
If you’re always chopping and changing members of your staff, you never have a cohesive team that works at peak productivity levels. But, if you retain your employees, everyone learns to work together, they know the company inside and out, and you have a more productive and efficient team that helps you make as much money as possible.
How do you retain your employees?
It is rare that someone will work at a company for their entire life. However, you can do things to improve employee retention, and it all starts with understanding what employees want from an employer.
Most employees want a decent salary, but they also want good benefits. They want to feel like the business is looking after them with a decent pension, maybe some healthcare benefits, and so on. Moreover, they also want to have room to grow in the company. Think about some of the main reasons people quit their jobs. One common reason is a lack of career growth.
If someone doesn’t feel like they can grow while working for you, their only option is to quit and get a better job somewhere else. So, you have to be open and offer promotions or raises for employees as they show their loyalty and talents. Let people know that new opportunities are available if they commit to your business. This alone will encourage employee retention as they know that their hard work will pay off in the future.
Another common reason people leave their jobs is a lack of appreciation. Nobody wants to work for a company where they feel like another cog in the machine. You have to show that you appreciate your employees and value the work they do. This means you interact with them, show your face, give them praise and feedback, etc.
Bonuses show appreciation brilliantly, as do things like employee of the month awards. Create a company culture that focuses on appreciating employees and making them feel seen and heard.
Having a good relationship with your employees will help you retain them. They should see you as someone that’s easy to approach and speak to if they have any problems. You don’t want to rule with an iron fist and scare your employees – it will literally scare them away and they will find someone better to work for.
Final words
On that note, we’ve reached the end of this article. The key secret to saving money for small businesses is employee retention. The higher your retention rate – and the lower your turnover rate – the more money you will save. It really is as simple as that, which is why an overhaul of your recruitment process is needed.
Focus on retaining the talent you have, perhaps with an employee engagement platform, and making your business an attractive place to work. This will help you keep the same team together for as long as possible, saving a fortune – while also helping you make more money.
