It is no secret that one of the biggest challenges for small businesses right now is retaining labor. It is simply hard to get good, reliable people nowadays.
The problems even seem to start at the hiring stage. Other than getting no call-backs from candidates, I’ve had folks no-call and no-show for an interview, or even disappear after an offer is made. I’m not sure why COVID really exacerbated these behaviors when they should be considered standard courtesies, but I digress. Back to labor retention.
If you are fortunate enough to find and hire a good employee, one of your main objectives should be to keep them as long as possible. There are plenty of statistics that show how retaining an employee is MUCH less expensive than hiring new. I have seen this to be true both from a raw cost perspective, but also time. The time it takes to screen, interview, and onboard someone new is staggering.
I recently had a great call with a mentor of mine. He owns an appliance servicing and installation business and has managed to build a great employee culture with better-than-average employee retention. Here are some of the methods that he uses to keep his employees longer (and happy):
1. Tool allowances. While this just looks like an additional cash payment to an employer, an employee sees this as a brand new Milwaukee Drill and Bit Set which they “wouldn’t be able to get at another job”. The allowance itself can be a couple hundred bucks every couple months in the form of direct reimbursement or a gift card. Decoupling straight cash compensation with physical goods seems to be a good way to create a unique benefit, and has employees saying “other companies are not as good as this one because they don’t offer ____”.
2. Daily paydays.
It is bizarre to think that getting paid every two weeks has become the norm, and that so few people question how little it makes sense. Shouldn’t people get paid for the work that they do when they do it? I don’t get Starbucks, do groceries, get lunch, and pay these three separate vendors at the same time after 2 weeks. Fortunately, there are companies that are bridging this gap, and it can make a big difference to employees. There are payroll-type companies that can pay your employees daily such as Payactiv, Branch, Spring, Paytient, DailyPay and more. The cost may be minimal (or none) to the employer, while employees are able to receive their earned wages immediately for a minimal fee.
3. Health benefits.
With a flawed and expensive healthcare system, employees want to make sure that they and their families are protected via health benefits. It is becoming easier to offer health benefits nowadays as an employer, and the cost can be shared between employer and employees. Of course it depends on the role, but even if the employer cost of health benefits is a few hundred per month per employee, but it means the employee stays with you long term, it may be money well spent.
4. 90 Day Bonus or other retention bonuses.
With some employees kicking the tires of employers, or simply waiting until they find a job that pays a dollar more per hour to quit, retention bonuses may be money well spent for an employer. This could look like a cash bonus after an employee spends X days in the job – time periods are role-dependent, but think a first bonus is awarded the first 30 days, 60 days, 90 days, or 180 days. The retention bonus could increase the longer the employer stays. When an employee sees a roadmap early-on for what they can earn, they may be more likely to stay. Of course, you have to be careful about an employee doing the bare minimum to hang on just for the retention bonus, but it can be a motivator.
5. Bonus Pools.
Employee performance bonuses are almost a staple nowadays, but they need to be done the right way. One way to do it is to create a “bonus pool”. This could be a % of revenue that goes into a bonus “bucket” that gets awarded to employees based on certain success metrics such as positive customer reviews, the most productive employees, etc. Having employees compete for the highest amount may create incentive and motivation to perform. Major key alert – make sure everyone gets something from the bonus pool. Have the #1 performer get the most, but don’t have the lowest performer get zero. That way everyone feels like they get something based on their efforts.
What employee incentives have you seen to be effective in your business that increase retention?
