Employee Retention - Why do Employees Leave ? Factors Affecting Employee Retention

Employee retention likely to be top focus for recruiters: Survey

When it comes to recruitment, employee retention and quality of people being hired are likely to be the top priorities for organisations in 2016, says a survey.

Employee Retention is a process in which the employees are encouraged to remain with the organization for the maximum period of time or until the completion of the project. Employee retention is beneficial for the organization as well as the employee.

Retention of employees is part of Human Resource management and planning efforts. Turnover, as the opposite of retention, often has been seen as a routine HR matter requiring records and reports. Indeed, retention of employee is not the matter that can be dealt by the reports or records, it is purely depends on how we understand individual concerns especially in case of woman employees who are planning for pregnancy. the only simple logic employers must understand from the employee point of view is, organisation must be like a helping hand for the genuine concerns. Thus, organizations are being forced to study why employees leave and why they stay. Sometimes an individual in the HR area is assigned to specifically focus on retention to ensure that it receives high priority.

Why do Employees Leave ?

Research says that most of the employees leave an organization out of frustration and constant friction with their superiors or other team members. In some cases low salary, lack of growth prospects and motivation compel an employee to look for a change. The management must try its level best to retain those employees who are really important for the system and are known to be effective contributors. There is other side of the coin when it comes to women employees.

According to the survey conducted, the major reason for woman employees leaving organisation is not about remuneration or compensation, dissatisfaction, constant friction with their superiors or with their peer or lack of growth prospects, lack of career development and no motivation by their employer.

The major reason behind is at the time of pregnancy. For any person when it comes to family or job, there is no second thought, it is family. Therefore every organisation need to give special focus on the high priority issues of their employees and should be like a helping hand. Maternity benefit is one of the key motivating and retention strategies for woman employees.

Countries like India, enacted a special Act called Maternity Benefit Act,1961 for the ensuring of maternity benefit to women employees by their employer who are covered under the said Act. The said Act mandates compulsory maternity leave with salary and flexi- work in post maternity leave.

Maternity benefits curtails post-maternity attrition of women employees

India: Several organisations have over the last few years introduced new policies to curtail attrition among women employees post maternity. Between 2003 and 2010, according to Avtar, a diversity and inclusion consulting firm, over 48% of employed women under 30 years of age dropped out of the workforce due to maternity and childcare. It's a challenge organisations are facing head-on. From flexi-work to phase back programmes, no stone has been left unturned.

The hard work is finally paying off. Organisations are witnessing a gradual reduction in attrition levels among women employees post maternity.

Over the last three years, Maersk Group India has seen a steady decline in attrition among women employees post maternity from 30-33% in 20132014 and 24-26% in 2015 to 7% so far in 2016. IBM India, on the other hand, has reduced attrition among women employees by 10% in the last two years, while at Cummins, a return-to work programme called `Reboot' launched in May 2016 has already seen a positive outcome.

Maersk had in April-2016 introduced improved maternity benefits of a minimum 18 weeks of maternity leave on full pay and a phased return-to-work programme with reduced hours by 20% on full pay for up to six months to all employees who return from maternity leave. Year on year, 3-5% of its women workforce proceed on maternity leave. Maersk realised when women return to their careers, they may sense reduced confidence levels. Many lose leadership roles to their peers who remained in the workforce. It was critical for Maersk, which has a women-to-men workforce ratio of 30:70, to introduce a `return-to-work' initiative and transition employees on a career break to full-time careers. Here, women leaders are provided with real-time challenging business project opportunities, deployed through a holistic orientation and developmental programme focusing on specific skills and capabilities to settle in their roles at the earliest and assigned a mentor.

In 2009, Standard Chartered Bank was among the first companies to offer six months maternity leave. Soon, a bunch of companies started offering this. But even after offering

the best-in-class six months, attrition rate of women who went on maternity leave was high, at 35-40%. Most returning mothers were plagued with guilt and in spite of having very understanding managers, they decided to drop off.


Hence it is the responsibility of the line managers as well as the management to ensure that the employees are satisfied with their roles and responsibilities and the job is offering them a new challenge and learning every day.

Employees today are different. They are not the ones who don’t have good opportunities in hand. As soon as they feel dissatisfied with the current employer or the job, they switch over to the next job. It is the responsibility of the employer to retain their best employees. If they don’t, they would be left with no good employees. A good employer should know how to attract and retain its employees.

Facts [+]

Retaining that pool of talent was hardly a problem. That's changing, says Anupama Kalra, executive director at United Way, a US based funding organisation for NGOs.

Finding people is a challenge even within the sector as those with relevant experience demand multiples of their salary. For example, a programme officer with 2-3 years' experience who manages small NGO projects and makes around Rs 15,000-16,000 a month, could hope to get Rs 30,000 elsewhere. "That's the jump they're expecting - 30% to 50% and sometimes even 100%," says Kalra. - The Economic Times, 31 Jan, 2012,

Factors Affecting Employee Retention

Consciously hiring freshers is a popular practice across organisations these days. Most companies believe that hiring freshers from top colleges is a kind of guarantee that they will stick to the job for a relatively longer duration. While offering a good pay check is important, companies need to go that extra mile to make sure their attrition rate is low. Progressive HR functions are now ensuring that freshers establish a long-term association with the company beyond the pay check. Here are a few strategies they are employing:

1. A well-defined career path:

Employees, whether freshers or ones with experience, want to understand how the leadership of an organisation can facilitate their growth. They want to see tangible examples of how their counterparts have grown in the firm. For many, growth is not just a vertical ladder. A lateral lattice is equally important. The young workforce is keen on having early experiences of doing different things rather than being sandboxed into one job role. Hence, it is important for companies to chart out well-defined career paths that factor in a `variety of work' that encourages their employees to stick to the organisation.

2. Compensation

Compensation constitutes the largest part of the employee retention process. The employees always have high expectations regarding their compensation packages. Compensation packages vary from industry to industry. So an attractive compensation package plays a critical role in retaining the employees.

Compensation includes salary and wages, bonuses, benefits, prerequisites, stock options, bonuses, vacations, etc. While setting up the packages, the following components should be kept in mind:

Salary and monthly wage: It is the biggest component of the compensation package. It is also the most common factor of comparison among employees. It includes

    1. Basic wage

    2. House rent allowance

    3. Dearness allowance

    4. City compensatory allowance

Salary and wages represent the level of skill and experience an individual has. Time to time increase in the salaries and wages of employees should be done. And this increase should be based on the employee’s performance and his contribution to the organization.

    • Bonus: Bonuses are usually given to the employees at the end of the year or on a festival.

    • Economic benefits: It includes paid holidays, leave travel concession, etc.

    • Long-term incentives: Long term incentives include stock options or stock grants. These incentives help retain employees in the organization's start-up stage.

    • Health insurance: Health insurance is a great benefit to the employees. It saves employees money as well as gives them a peace of mind that they have somebody to take care of them in bad times. It also shows the employee that the organization cares about the employee and its family.

    • After retirement: It includes payments that an Employee gets after he retires like EPF (Employee Provident Fund) etc.

    • Miscellaneous compensation: It may include employee assistance programs (like psychological counselling, legal assistance etc), discounts on company products, use of a company cars, etc.

3. Work Relationships

Work relationships that affect employee retention include supervisory management support and co-worker relations, A supervisor or manager builds positive relationships and aids retention by being fair and non-discriminatory, allowing work flexibility and work-family balancing, giving feedback that recognizes employee efforts and performance, and supporting career planning and development.

Additionally, many individuals build close relationships with co-workers. Such work-related friendships do not appear on employee records, but these relationships can be an important signal that a workplace is positive. Overall, what this means is that it is not just where people work, but also with whom they work, that affects employee retention. If individuals are not linked with or do not relate with their co-workers, there is greater likelihood for turnover lo occur.

4. Job and Work-Life

Many individuals have seen a decline in job security during the past decade. All the downsizings, layoffs, mergers and acquisitions, and organizational restructurings have affected employee loyalty and retention. As co-workers experience layoffs and job reductions, the anxiety levels of the remaining employees rise. Consequently, employees start thinking about leaving before they too get cut. Organizations in which job continuity and security are high tend to have higher retention rates.

Some jobs are considered "good" and others are thought to be "bad," but not all people agree on which jobs are which. As mentioned previously, the design of jobs and peoples' preferences can vary significantly. Job design factors that can impact retention include the following:

    • A knowledge, skills, and abilities mismatch, either through overqualification or underqualification, can lead to turnover.

    • Job accomplishments and workload demands that are dissatisfying or stressful may impact performance and lead to turnover.

    • Both timing of work schedules and geographic locations may contribute to burnout of some individuals but not others.

    • The ability of employees to balance work and life requirements affects their job performance and retention.

Numerous examples could be given on how each of these items affect retention, but one example conies from a survey of chief financial officers on the impact of these issues in their firms. In this survey, work-life flexibility efforts were seen as creating significant retention, recruitment, and productivity results. This study illustrates that how organizations address jobs can drive retention efforts, including global retention as discussed in the Human Resource Perspective.

5. Work-life balance:

Irrespective of their industry, it is important for working professionals to maintain a work-life balance. While high-paying jobs do demand longer hours of work, organisations should implement flexible working hours and work from home policies while respecting their core office culture. Practices like occasional work from home, flexible work arrangements, `ME' time (keeping a chunk of their time to pursue a hobby of their choice) are ways to help employees maintain a healthy work-life balance.

6. Organization Environment

It is not about managing retention. It is about managing people. If an organization manages people well, employee retention will take care of itself. Organizations should focus on managing the work environment to make better use of the available human assets. People want to work for an organization which provides

    • Appreciation for the work done

    • Ample opportunities to grow

    • A friendly and cooperative environment

    • A feeling that the organization is second home to the employee

Organization environment includes

    • Culture

    • Values

    • Company reputation

    • Quality of people in the organization

    • Employee development and career growth

    • Risk taking

    • Leading technologies

    • Trust

Facts [+]

Watson Wyatt Worldwide is a leading provider of human capital and financial management consulting services. The company assists clients with employee retention and motivation, emerging opportunities in human capital management, and insurance and investment financial advice. The company was established in the U.K. in 1878 and has approximately 6,000 associates working in thirty countries.

The study surveyed 584 working Americans of whom 56 % agreed that, after compensation and benefits, feeling that they were appreciated would motivate them to stay in their current position. More women than men identified this as a significant factor (62 % compared to 50 %). This compares to 46 % of the total who said opportunities for career advancement would motivate them to stay. Just over half (54 %) felt that colleagues appreciated them more than supervisors or senior managers.

Other significant findings include:

    • 68 % said they had received no useful feedback from the supervisors in the last six months

    • 82 % have not agreed career goals with their supervisors

    • 53 % lack a clear understanding of how their role contributes to the company objectives

  • 25 % have been given new duties or responsibilities that they feel are beyond their skill set

7. Recognition and feedback:

Typically, bosses are quick on giving feedback when issues crop up. However, appreciation is rare when things go smooth. Letting your employees know that you appreciate their efforts, recognising and highlighting impactful outcomes and giving timely feedback is crucial. Similarly, gaining feedback from employees and engaging oneself in meaningful dialogues to improve areas that are creating obstacles is important.

8. Transparent and fair reviews:

Enabling transparent and clear reviews and appraisals for employees helps them achieve more with a clear picture of being rewarded on the basis of merit. The review process should celebrate key milestones in an employee's career in an organisation where the focus is on highlighting key achievements, strengths and development areas, followed by a mutually agreed upon goal setting discussion.

Myths and Realities about Retention

Keeping good employees is a challenge that all organizations share and that becomes even more difficult as labour markets change. Unfortunately, some myths have arisen about what it takes to retain employees. Some of the most prevalent myths and realities are as follows:

Money is the main reason people leave. Money certainly is a vital HR tool, and if people feel they are being paid inadequately, they may be more likely to leave. Bui if they are paid close to the competitive level they expect, other parts of the job become more important.

Hiring has little to do with retention. This is not true. Recruiting and selecting the people who fit the jobs and who are less likely to leave in the first place, and then orienting them to the company, can greatly increase retention. It is important to select for retention.

If you train people, you are only training them for another employer. Developing skills in employees may indeed make them more marketable, hut it also tends to improve retention. When an employer provides employees with training and development assistance, job satisfaction may increase and employees are more likely to stay, particularly if they see more future opportunities internally.

Do not be concerned about retention during organizational change. That is exactly the time to worry about retention. Although some people's jobs may have to be cut because of economic organizational factors, the remaining employees that the company would like to keep may have the most opportunity and reason to leave voluntarily. For example, during a merger or acquisition, most workers are concerned about job security and their employer's future. If they do not feel a part of the new organization early on, many may leave or evaluate alternatives.

If solid performers want to leave, the company cannot hold them. Employees are best viewed as "free agents." who indeed can leave when they want. The key to keeping solidly performing employees is to create an environment in which they want to stay and grow.

Reference: Human Resource Management By Robert L. Mathis, John H. Jackson