In times of a shortage of skilled labor, employee retention is becoming increasingly important. A multitude of companies are acutely looking for skilled workers, experts, and specialists – nationally as well as internationally. Replacing an employee can cost a company up to twice a year’s salary. In addition to obvious, direct costs for termination talks, exit interviews, severance payments, job advertisements, job interviews, selection processes, contract negotiations, administrative expenses, onboarding and training, the indirect costs play a major role as cost drivers. The longer a position remains vacant, the higher is the loss in productivity occurring in the company.
Therefore, it should be the target of every employer to ensure employee satisfaction and thus bind their employees to the company long-term.
Employee retention
Salary adjustments are no longer the universal remedy for retaining employees. Appropriate remuneration for work performed has become a basic requirement. However, employee retention measures have multiple dimensions. The identification of career and development prospects, the change in work content, recognition, appreciation, a regular personal exchange with the superior, a harmonious working atmosphere, flexible working hours, the compatibility of work and family, mobile working or equal treatment are considered to be among the most effective.
It should be noted, however, that satisfaction is a subjective feeling and consequently depends on individual factors for each employee. It is therefore advisable to find a mixture of general offers and individually adaptable measures.
Times of crisis hold a special potential for companies. According to the motto “We stick together – for better or for worse”, measures currently taken to support employees, e.g. inflation compensation, are of particular importance.
In order to check employee satisfaction in your own company and to get suggestions for measures that are as effective as possible, a regular exchange between manager and employee is recommended. Alternatively, anonymous employee surveys can be carried out.
Avoiding early staff turnover
The so-called early fluctuation during the probationary period plays a special role in the context of employee retention. Having to re-fill a vacancy that has just been filled increases the recruiting effort and thus the costs enormously.
Once hired, the best way for companies to avoid this is through a structured onboarding process that introduces employees to the subject and simultaneously conveys important factors of the corporate culture. The process can be supported by regular exchanges in the team and with the manager, but also by accompanying training and information offers.
Fluctuation rate in Germany
In Germany, fluctuation on the labor market has remained almost constant for over more than a decade and only showed slight deviations in times of economic crisis. If the economic situation improves, the demand for workers increases and more job offers are advertised. This increases the chances of changing jobs. Furthermore, on the German labor market staff turnover is largely the result of contract terminations initiated by employees. Between 2007 and 2021 the ‘inventory neutral’ turnover rate (excl. labor market movements caused by retirement or job entrants) ranged between a maximum of 32.7% in 2019 and 29.5% in the crisis year 2020 (Institute for German Economic Research 2022). As a result, high fluctuation at company level – at least in Germany – is often due to low employee retention. This stresses the importance of the issue in a labor market that is simultaneously seeing a decline in the available workforce.
Article written by Mientje Krüger and Svenja Schütz, CFR Global Executive Search Germany
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