Strategies for small businesses to retain employees

A business’s ability to retain employees, and the consequent drop in productivity, can be detrimental. Small businesses that operate with tight profit margins can be particularly hard hit when they lose employees.

It is hard to estimate the true cost of replacing an employee. Based on survey data, the Society for Human Resource Management has estimated that a non-executive hire will cost around $4,700. Other estimates show that the cost of a non-executive hire can be as high as one-half to twice the salary.

There are several areas that small-business owners can concentrate their efforts on to make a difference when dealing with turnover issues. While some, like compensation and benefits are more expensive, others, such as communication and onboarding, can be very affordable.

According to a Pew research center survey, 63% of U.S. workers who quit their job in 2021 cited low wages as a reason. A competitive compensation package that includes bonuses, wages and other incentives is as important for retaining employees as it are for recruiting new talent. Employees can also be discouraged from leaving the company and encouraged to stay.

Employers often offer health insurance, retirement plans, and paid time off. Employers may offer additional benefits, such as daycare services, commuter benefits, and mental health and wellness programs. Tax-saving options, such as flexible spending accounts, health savings accounts, and 529 college savings plans, can also help to differentiate your business.

Lauren Winans, CEO and founder of Next Level Benefits, a HR consulting firm, says that if investing in benefits programs is not financially feasible, there are other options. You could set aside money and reimburse employees for the amount they use, such as to pay for health insurance or to cover child care costs span>

Small-business owners should not overlook the ability to support employees in achieving equity between work and personal needs. You can show your appreciation for your employees’ well-being by offering them flexible work schedules, remote work options, generous pay, and encouraging them take breaks when their workload becomes too heavy.

Winans says that a small-business owner who can offer flexibility and autonomy is a valuable asset that could be difficult to find in a larger company.

Onboarding can play a key role in retaining new employees. Holly Wade, executive director of National Federation of Independent Business Research Center, says that “first impressions are really important.” Wade says that a new employee’s connection with their job and their investment can be established within the first week to seven days of their tenure.

Wade says that “connecting them with another employee is hugely beneficial” and providing mentorship right from the beginning is a great way to help. It’s easy to make them feel part of the team by scheduling lunches for senior staff and new hires.

Owners of small businesses are often able to offer employees new responsibilities that will stretch their talents. Wade says that being able to grow an employee’s job and give them additional skills in areas they may not have been hired for initially is attractive for both employees and owners. Employees can be encouraged to explore career development opportunities and highlight these opportunities.

Encourage them to look for other professional development resources such as online courses, workshops, or apprenticeship programs. To show your commitment to employee development, you may offer a stipend (or PTO) to offset the time and cost.

Recognizing employee achievements is a great way to show appreciation and make your employees feel appreciated. Peer-to-peer recognition allows employees to recognize each other’s talents and skills. This can help build relationships between individuals and teams. Rewards such as employee discounts, free meals, or a day off, that may be tied to performance can help employees feel valued and boost their morale.