Employee Retention Strategies for Small Businesses

Did you know that the cost of replacing a frontline employee (someone who interacts directly with customers or clients) can be 40% of their salary? For small business owners, high employee turnover can impact your budget and potentially divert your focus away from other important responsibilities as you spend time re-hiring and onboarding new employees.

Building a close-knit team that understands your goals is often crucial for running a small business, especially since this team represents your brand and manages daily operations. However, frequently losing employees means starting from square one each time, and it can require significant resources to train new hires to meet your standards for care and quality. This is why implementing employee retention strategies can be so important.

What is employee retention?

Employee retention refers to a business’s ability to keep employees from leaving, resulting in reduced turnover. The strategies that work for your small business can depend on your industry and should be customized to match your specific work environment. However, we have outlined some common retention strategies, including:

• Dedicate extra time when hiring employees
• Create a positive work environment
• Provide employees opportunities to advance
• Show appreciation to generate a sense of belonging
• Offer employees a work-life balance to reduce burnout

Dedicate extra time during the hiring phase

Retention can start even before someone joins your team. Whether you are in the process of forming a new team or adding employees to an existing team, it’s crucial to take the time to thoroughly evaluate each potential candidate. You want to determine whether they share your business’s mission and would be a good fit for your business’s culture. While matching the required skill set is important, finding someone who is committed to your business’s success and who reflects the soft skills you’re looking for in a team member is key.

To help make sure you dedicate enough time during this phase, start by creating a job posting that clearly outlines the role’s key responsibilities, as well as your small business’s mission and values. This is your opportunity to showcase who you are and what your business represents. Additionally, prepare interview questions that will help you assess their work style, personality, and what makes them want to work for your business.

Create a positive work environment

Your work environment can play a crucial role in dictating employee morale, so finding ways for your employees to connect can be incredibly important. Research shows that 48% of individuals quit their jobs due to “bad company culture,” while research from MIT Sloan found that a toxic culture is the largest factor causing attrition, as it is 10.4 times more likely to predict turnover compared to compensation.

When employees feel happy and connected to their work, it can generate stronger engagement, which has been shown to produce better business outcomes. From maintaining strong communication with each team member to scheduling team building opportunities, there are a variety of ways you can help build a positive work environment that’s customized to your employees.

Provide employees opportunities to advance

Career growth has proven to be valuable for many employees, as 63% of workers cited that “no opportunities for advancement” was the reason they quit their job. When team members know they can grow within a business, it can foster a sense of purpose, showing that their work contributes to both the business’s long-term success and their personal development.

Growth opportunities can vary, but can often include providing internal promotions, skill development opportunities that can help employees expand their skillsets, and more. Learning on the job can be extremely beneficial, as it provides purpose for eight in ten employees and generates a sense of connection to the business for seven in ten employees.

How you implement this strategy may depend on the size of your team and their responsibilities. A Canadian small business is considered to have up to 99 paid employees, so if your business is at the mid to high range of that limit, this strategy might be easier to implement than someone who has a couple of employees, as there may be more opportunities available for employees to grow.

However, offering advancements doesn’t always involve increasing your budget. For instance, providing lateral career opportunities can be an effective retention tool for small businesses on a budget. A lateral career opportunity involves shifting an employee to a new role at the same salary, allowing them to try something new. Research shows that lateral opportunities are 12 times more predictive of employee retention than promotions.

Show appreciation to generate a sense of belonging

It is important that your employees feel a sense of belonging, as workplace belonging can lead to a 50% reduction in turnover risk. With a lack of belonging being one of the primary reasons why 51% of employees quit, it is essential to consider how to foster it in your small business.

You can show appreciation in several ways, such as recognizing a team member’s success during a group meeting, expressing your gratitude through a message, acknowledging their efforts while they are on the job, celebrating significant milestones, etc.

Offer employees a work-life balance to reduce burnout

Burnout is prevalent among 47% of Canadian employees. There are several reasons why it can develop, but one of the top factors is insufficient work-life balance.

Work-life imbalances are among the top three reasons for leaving a job, according to a 2023 study, and 47% of Canadians say they would quit their job if it meant it would stop them from enjoying life. Some ways small business owners can accommodate a work-life balance include:

• Providing flexible work arrangements (if that applies to your small business) or flexible start and end times
• Allowing shift swapping when needed
• Granting time off for personal needs
• Encouraging breaks
• Avoiding overloading staff
• Providing mental health resources and personal check-ins to prevent overworking

Explore Small Business Solutions with The UPS Store

If you’re ready to take your small business to the next level, visit The UPS Store at a location near you. Our Small Business Solutions are designed to support a wide range of business needs, helping you save time and stay organized.