Having an employee retention policy can be a great idea for some industries! Industries, such as housekeeping and foodservice continually have very high turnover and doing anything to reduce that generally will save your business money. Other high demand industries, such as healthcare, can also be frustrating trying to retain quality employees. Let’s face it; the hiring process costs you money and time.
The time you invested in the employee that has left. The time you invest in the new employee arriving. The productivity lost during both of those while employees learn the system and process. Your productivity while you invest time in interviews! The cost of recruitment! All these are reasons to consider investing your time into an employee retention policy and including that into one of your most valuable documents, an employee handbook.
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Once you have come to the conclusion that you need and employee retention policy the next step is to decide what you want in it and how you want to present it to your staff. As an example do you want to give financial incentives for remaining an employee of your business? On the other hand maybe they become eligible for certain benefits, perhaps retirement plans. So tying your incentives into a certain amount of time obviously is important but let’s go a step further and also work in their performance.
So if you’re employee retention policy states that after one year they are eligible for bonus it would be wise to also tie into that a requirement that their performance reaches a certain level. As an example if your employee performance review system has a rating system they must be performing at least above average. This way you are gaining by retaining a valuable employee. We will talk about what makes up a great employee performance review system in another article on this website.
So instead of giving a 5% increase after one year…
You may want to have a combination of both an immediate financial incentive and one that encourages an employee to continue on by being able to see an incentive on an ongoing basis. Sometimes having an employee retention policy that spreads some benefits out over time is a great plan. This may be in the form on smaller wage increases spread out. So instead of giving a 5% increase after one year, you may consider spreading that out in smaller increases over that year long period. Again, you must tie the increases into performance. You certainly don’t want to offer a pay increase to an employee you are not happy with in the first play and would rather see walk out the door.
There is no question that turnover is frustrating and expensive. You can work up your own number as to how much it is costing you and then applying a portion of that toward your employee retention policy incentives. The financial costs can be enormous so make you sure tally up everything. Most industries have a way of calculating the norm for productivity. Take those numbers and compare them to your own and you should be able to begin to understand the true cost of turnover.
Good Luck and May God Bless You!