It’s always been more cost effective to retain and develop employees, with research suggesting it costs around 150% of a departing employees’ salary to properly replace them. That statistic should be ringing in hiring teams’ collective ears as, according to the latest iteration of our Resourcing and Talent Planning Report 2022, delivered in conjunction with the CIPD, employers face significant challenges just finding the talent they need, let alone recruiting them. The report looked into key trends including why retaining the top talent already within your organisation has never been more important, and provided some suggestions on how firms can hang on to their top performers.
In such a challenging market, it was very surprising to see that just 38% of CEOs had listed talent management as their top priority. While this figure has risen from the 30% reported last year, it’s still lower than pre-pandemic levels and suggests that management teams are not yet taking the threats posed by a challenging market as seriously as they perhaps should.
Even more concerningly, only 17% of responding firms said they currently calculate the cost of labour turnover as an organisation. Larger, private sector firms were more likely to do this, but it is projected that more employers will recognise the impact that strategic planning can have on their ability to retain talent as hiring challenges become more acute over the coming years.
More broadly, the rate of labour turnover was reported as considerably lower than in other years. This is most likely both an employer and candidate led trend with the latter group being cautious over switching roles in uncertain economic times, and the former being conscious of the importance of retaining talent when there is not a steady supply of available potential replacements.
In more encouraging signs, a growing number of businesses are undertaking initiatives to increase employee retention rates with 37% reporting this as a key priority, up from 29% in 2021. Perhaps unsurprisingly, increasing pay was the number one method used, with 54% of organisations, up from 32% in 2021, saying they had boosted pay to keep their top performers. These findings were supported by research from Payscale’s Fair Pay Impact Report which revealed that employees who felt that their organisation was not transparent about pay practices were 183% more likely to look for another job, while those that worked for reportedly transparent firms were 65% less likely to look for new opportunities. Pay increases were followed by boosting support for employee wellbeing. This area showed considerable differences between sectors with some industries favouring increased flexibility over pay rises. There were even greater discrepancies between methods adopted by the public and private sectors, with just 14% of employers in the former group using pay as a retention tool, compared to 61% in the latter.
Other methods to retain people adopted by employers included increasing employee involvement with workplace initiatives and / or making changes to improve employee work-life balance. Perhaps unsurprisingly, offering greater workplace flexibility, and the ability to work on a hybrid basis, also scored highly. Businesses are increasingly noting that professionals are seeking flexible employers. In research from the US, home-based job postings reached an all-time high earlier this year and accounted for 20% of all listings, but over 50% of all applications. Firms that don’t, or can’t, offer some degree of flexibility to their employees are likely to lag behind the competition. Upskilling and retaining opportunities also appear to be growing in popularity; three in 10 firms looked to boost their line managers’ skill sets or support employees through coaching and mentoring systems in their efforts to keep them within their workforces.
As many employers are currently finding out, it’s of crucial importance to nurture and retain your talent in the current climate where firms are struggling to source the employees they need. Unfortunately, this trend doesn’t appear to be ending anytime soon. The British Chamber of Commerce reported earlier this year that 76% of employers in the UK are struggling to hire, which marks a new record high. The biggest challenges appear to be facing employers in the construction, production, manufacturing and hospitality industries, however recruitment challenges are widespread and will be experienced by firms in almost every sector, putting more importance than ever on the methods that they use to keep their top talent within their workforces.
To find out more about the methods firms are adopting to retain their top talent, and why it’s so important to do so, take a look at our Resourcing and Talent Planning Report 2022