Entering 2023, the labor market has been extremely tight. If we look at the data from the last quarter of 2022, it paints a stark picture of the gap between available workers and job openings.
For example, the latest figures in the US show there were 11.4 million job openings in December 2021 and 11 million in December 2022, up significantly from 2020 (6.9 million). Yet, labor force participation continues to fall. The BLS reported that the number of active job seekers and those currently employed fell to the lowest since 1974 (excluding 2020, the year of the pandemic).
Various factors are motivating these figures - the BLS pointing to an aging population, a shallow recession, and declining birth rates as just some of the factors affecting these trends.
However, interestingly, one factor they don’t identify is employee retention.
In the last five years, recruitment has skyrocketed. Hiring rates for 2020, 2021, and 2022 were the highest in the previous ten years, closing at 4% by the end of 2022. Yet, turnover has been almost equal to this amount at 3.8% for the Q4 of 2022.
It’s also important not to forget that staff turnover costs money. Turnover has always been expensive, costing businesses 6-9 months of the employee’s salary on average.
All this to say, staff retention is essential for sustainable growth. Unfortunately, competition for talent is fierce, making it increasingly difficult for companies to find the right fit.
In light of this, we’ll examine a few staff retention hacks that can help to minimize staff turnover.
Let’s start with the most obvious solution that many businesses hesitate to implement: pay raises.
Compensation plays a massive role in whether employees feel valued. Interestingly, the average compensation rate for a civilian worker in Q3 of 2022 was $41.86 per hour. However, when we look closer at an industry level, for those in low-paying industries, such as hospitality, retail, and transportation, compensation was far lower at $18.37, $22.79, and $33.08, respectively.
So it’s no wonder that when job openings increased in 2022, many workers looked for better-paying positions. As many as 96% of workers intended to seek new employment in 2023, and of those, 40% cited low income as the key motivator.
This begs the question: Are you paying your employees fairly and competitively?
The truth is that not all salaries are fair. According to the US Bureau of Labor Statistics, although wages are up 0.3% in 2023, employees face an hourly wage decline because raises don’t match the consumer price index. So as living costs go up, salaries need to follow, and sadly, that isn’t always the case.
Needless to say, offering a competitive salary is the first step to retaining your workforce - especially when the labor market is this tight. However, if you’re unsure what a ‘fair salary’ is for the roles you’re looking to advertise, compensation analysis tools like LaborIQ can help. This software makes it easy to populate the average salary based on location, job title, and market trends. With this information, you’re better positioned to ensure competitors cannot poach your workers with a higher compensation offer.
Offer Career Growth
An ABC survey found that people quit their jobs in 2022 because they were bored and wanted to enjoy new opportunities. This is why offering professional development, training, and career progression opportunities is imperative to keeping employees engaged.
One way to help shape the future careers of your staff is to understand what skills and training are necessary to promote workers to more senior roles. Then, use this information to create and provide relevant professional development opportunities. This doesn’t have to break the bank.
For instance, businesses can:
- Appoint mentors to junior workers
- Fund online training programs
- Set aside time when employees can research and develop skills relevant to their career progression.
Be More Flexible
The pandemic forced many businesses to test-drive remote working arrangements, and for many, it proved more successful than anticipated. So successful that 94% of employees don’t want to return to the office full-time.
Remote work enables staff to spend more time with their families, take care of household chores, save time and money on the commute, and generally enjoy a better work-life balance. It also offers more flexibility to working parents and even, in some cases, those with dreams of traveling.
Enabling a hybrid model or even allowing full-time remote work could be a significant factor in convincing your employees to stay.
Boost Your Staff Retention Rate
Boosting staff retention during this era requires businesses to offer employees what they need - namely, more flexibility, better pay, and greater professional development opportunities.
Offering better compensation might be a worthwhile cost that pays off in the long run. With comprehensive compensation analysis, not only can you keep tabs on what a competitive salary actually is, but you may also find lower-cost hiring opportunities in remote locations. This is especially true if you’re willing to offer flexible work models.