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How to Improve Employee Retention?

Taking a Closer Look, Part 3

By Insights Team on January 28, 2018

Employee Retention

Employee Retention

Raise your hand if you’ve ever sweat over your company’s high turnover rates. You’ve tried the “high-level” retention strategies. You’ve done the exit interviews...

But you yield practically nothing?

You’re not alone. According to the Bureau of Labor Statistics, three million employees have voluntarily left their jobs every month in America since June 2017.

Searching for a way out of the vicious cycle? Read on. We’re taking a closer look at retention and at the unique challenges employing predominantly hourly workers (challenges PayActiv holds expertise in solving for both businesses and their employees).

Read on to understand, then leverage, the deep inner workings of employee retention.

Let’s Define It: 

What is Employee Retention? and Employee Turnover?

Employee retention refers to the ability of a company to retain its employees. Conversely, employee turnover is the number or percentage of workers who leave, voluntarily or involuntarily, from a company and are replaced by new employees.

So why is employee retention prioritized? To start, high turnover thwarts  profitability:

  • Replacing a $10/hour employee costs $3,328 — 16 percent annual salary costs for high-turnover, low paying positions
  • Replacing a $40k per year manager costs $8,000 — 20 percent annual salary costs for midrange positions
  • Replacing a $100k per year CEO costs $213,000 — up to 213 percent annual salary costs for highly educated executive positions

Say you’re a company with 3,000 employees — all of which are paid meager $10/hour wages — dealing with a 30% turnover rate. Add that up and you’re dealing with multi-million dollar annual turnover costs. These costs are made up of interview expenses, training and onboarding new hires, advertising costs, lowered engagement, decreased productivity, impact on morale, and so on. Each employee who leaves unavoidably takes a chunk of your profitability with them.

There are two main types of turnover: Voluntary and involuntary. Voluntary turnover is when an employee willingly leaves an organization. Reasons employees quit their positions include:

  • Feeling undervalued
  • Lack of professional development
  • Inadequate employee benefits
  • Boredom or lack of challenge
  • Personal issues (i.e. health or childcare)
  • Superior job offer elsewhere
  • Poor work/life balance
  • High job stress or unfair treatment
  • Low job satisfaction

Involuntary turnover happens when the employer decides to terminate an employee and the employee unwillingly leaves his or her position. Reasons employees are discharged include:

  • Poor performance
  • Dishonesty or lack of job integrity
  • Inappropriate work behavior
  • Absenteeism or bad time-keeping
  • Tardiness
  • Misconduct
  • Violating company policy
  • Drug or alcohol abuse

Alternatively, how does high employee retention benefit a company? Beyond avoiding all the costs of turnover, high employee retention also optimizes profitability.

The longer employees are retained, the higher level of performance they provide. Be it in retail, hospitality, customer service, medical care, or the like, they know your organization like the back of their hand — and are able to deliver accordingly. Long employee tenure creates high workplace morale as well. This comes with its own myriad of benefits such as increased productivity, improved workplace culture, less employee stress, and happier, healthier workers.

Thus, high employee retention is the goal. But how do you get it?

Employee retention is a balancing act, one of which many factors come into play. Therefore, before you’re able to deploy a high-level retention strategy, you must first have a high-level understanding of the deep inner workings of employee retention (i.e. the psychological factors.)

Let’s Talk Science:

Psychological Factors of Employee Retention

Ever heard of Maslow’s Hierarchy of Needs? If you have, it’s no surprise — this concept is widely understood as a fundamental understanding of human motivation, one of which is fittingly adopted by HR professionals who want to improve employee performance and retention.

Yet if the concept hasn’t resonated within your HR department, it’s time to resonate. Employee retention stands little to no chance without this understanding. Let’s cover the basics:

Maslow’s Hierarchy of Needs is a five-tiered model most commonly depicted in pyramid format. This theory — which psychologist Abraham Maslow proposed in his 1943 paper “A Theory of Human Motivation” — states that humans are motivated to achieve certain needs, some of which take higher priority than others. The basic needs, or what Maslow refers to as “deficiency needs”, take up the bottom four levels of the pyramid and are prioritized as follows:

  • Physiological
  • Safety
  • Social (or love/belonging)
  • Esteem

The top level of the pyramid is the final destination of human motivation, and is referred to as the “growth or being needs”: self-actualization and self-transcendence.

This theory suggests that human motivation progresses in this sequence. Once your physiological needs are taken care of (i.e. food, warmth, water), you then are motivated by your safety needs (i.e. physical safety, financial security, health and well-being), and so on. Employers must ensure employee needs are satisfied through these steps, from the basics on upward, to sustain any chance of the workforce exhibiting organization-oriented focus and high retention. Human beings find great difficulty in high-level performance without their basics met.

Fortunately, offering a work environment which caters to Maslow’s Hierarchy of Needs is more straightforward than you may think:

Physiological: Appropriate facilities such as cafeterias, vending machines, water fountains

Safety: Formal contracts of employment, retirement plan, sick pay, healthy and safe work environment, medical benefits, regular and fair monthly income, predictability Maslow's Pyramid Human Needs

Social: Promote team building, facilitate outside social activities, allow participation

Esteem: Use periodic individual praise and recognition, use a peer-to-peer or social recognition program, encourage participation, celebrate accomplishments

Self-actualization: Offer high level professional development, training, mentoring, engage in career discussions, provide challenges, encourage creativity

What about job fulfillment? How much does the work matter to retention rates?

An American Psychological Association study revealed that the level of enjoyment the work brings to an employee means more than pay, benefits, or lack of other opportunities to retention. Even though benefits (60 percent) and pay (59 percent) mattered to participants in the APA study, more than two-thirds reported they choose to stay with their current employer because they enjoy their work (67 percent) and stated their jobs fit well with their lifestyles (67 percent).

And as we know from a wide variety of research, happiness matters in the workplace:

  • Happy employees are 12% more productive, and unhappy counterparts 10% less
  • Unhappy employees cost U.S. businesses $300 billion per year
  • Happy employees earn 1.2 percent to 1.7 percent more
  • Companies with happy employees are 2.1 percent above industry benchmarks

Human beings are creatures of emotion. We feel, we think, we want — we long for purpose. We’re also creatures of survival. If we don’t have the basics for stability, instinctually we take whatever action is necessary to attain these fundamental safeties. As an employer, it’s your job to cater to these needs if you want high retention and optimal employee performance.

But what about employing hourly workers? We believe, and the statistics show, that employing predominantly hourly workers comes with its own unique set of challenges. Let’s talk about it.

Let’s Dissect:

The Unique Retention Challenges of Hourly Workers

If you’re an employer with mostly hourly workers, you’re likely dealing with staggeringly high turnover rates. No matter what measures you take to retain your best, they yield little results. What challenges are hourly workers dealing with that make them harder to retain for employers?

First, hourly workers are often dealing with severe financial stress. Here are some of the average wages for common hourly workers positions:

  • Retail salesperson — $13.07/hour
  • Restaurant cook — $12.23/hour
  • Senior care worker — $10.40/hour
  • Hospitality worker — $15.66/hour
  • Call center representative — $13.29/hour


These wages aren’t enough to support yourself, let alone those employees trying to support a family of 2 or 3+ people on an hourly wage which can barely (and sometimes, not be able to) support one human being. This is where the employee retention problem comes in for employers, and where Maslow’s Hierarchy of Needs comes into play, too. These hourly workers are in a constant battle to satisfy the two most basic levels on their hierarchy of needs: physiological and safety, both of which greatly surround around the need for financial stability.

And considering the fact hourly workers take up 60% of the U.S. workforce and account for 80% of hires each year, it’s no wonder financial stress plagues most employees and businesses:

In the meantime, hourly workers are falling prey to the alternative financial services industry. Payday loans, title loans, overdraft and late fees, and similar predatory financial services target upon urgent between-paycheck needs to make their profits, and it works. Americans spent $15 billion in overdraft fees in 2016, twelve million Americans take out payday loans each year spending more than $7 billion on loans fees, roughly 2.5 Americans spend $3 billion on auto title loans fees each year, and the average payday loan borrower is in debt five months of the year.

This brings us to the conclusion, to have any chance of high retention — and to also be able to save your workforce from these predatory financial services — you must offer a financial wellness program in your workplace which caters to your hourly workforce’s hierarchy of needs.

But what about addressing job fulfillment to increase hourly worker retention rates?

Many hourly jobs are inherently repetitive and tedious. Retail positions, food industry work, call center jobs. Not only are these jobs repetitive in nature, but most are customer-facing — a position which can completely ruin a worker’s day with one rude or arrogant customer. These jobs are also filled with part-time, student, or temporary staff. There’s then less investment involved on the employee side: If a job isn’t catering to their needs and interests, they can leave.

Hourly employees are less invested in company goals, too. With less investment in the company mission comes less engagement, and with less engagement comes involuntary turnover.

This is all showcased in the turnover rates of industries with predominantly hourly workers:

The solution? Read on and learn high-level strategies to create a positive work environment that retains employees — strategies which will make your organization a top pick among top talent.

Let’s Talk Solutions:

Retention Strategies You Can Start Implementing Today

For the last part of our taking a closer look at employee retention, we’ll be identifying four strategies which fit into each level of workforce’s hierarchy of needs. Once you implement, your employees will be taken care of and your workplace will become one of longevity. Let’s begin.

Optimize Your Onboarding (Social + Esteem) 

This is one strategy employers are often forgetting to leverage, and it’s coming at a high cost. Nearly 33 percent of new hires look for a new job within their first six months.

Yet onboarding is much more than just signing paperwork and showing the new hire around the workplace. This delicate time is about acclimating your newest asset to the company and expressing your company’s goals (and to tell them how they’ll fit into helping meet said goals). Be sure assess where their greatest strengths lie so they feel fulfilled, utilized, and valued.

From the beginning, your employees must feel like they’re boarding the right train. So make a good first impression. But most importantly, meet back up with your employee after the first month, the third month, the six month, and even a year later to check in with how they’re feeling.

Create a system that reminds you to thoroughly follow up with your new hires. Failing to see what they need periodically within their first year is a surefire way to see high turnover.

Offer Professional Development + Challenge (Self-Actualization) 

In many careers, and in the majority of hourly positions, employees find themselves stuck. Nothing is advancing, they’re not being challenged, and they feel like they’re being forgotten. But you must make sure your employees don’t get bored if you want to retain them.

Employees want to grow and advance, like any other person in this world. So nurture your talent. What you nurture will stay. Workers who see a dead end will run the other direction.

You may start to see a theme here, but: Make a plan. Document it. How are you going to develop your employees? Will you offer mentoring programs? Are you going to promote from within more, incentivizing your employees with dreams of reaching that next big position?

Even better? Ask your employees what they want. What do they want to learn? Where do they feel they could use help? Your workforce grow loyalty for your company, because you truly care.

Offer a Comprehensive Employee Benefits Package (Physiological + Safety) 

If your employees are worried about how they’re going to receive medical care or how they’ll feed their children while they wait for payday, there’s no way your company is their top priority.

Per Maslow’s Hierarchy of Needs, their very basics must be met first. Are you offering benefits to improve their health? Their financial wellness? Their overall peace of mind?

Two perfect ways to start (if you don’t have these already) is to offer health insurance and a financial wellness program. Physical wellness and financial wellness are the two most important things to any employee, and once those basics are covered, organization focus can begin.

And, your financial wellness program should most importantly include earned wage access to relieve your employees’ need to use predatory financial services in between paychecks.

Create a Rewards + Recognition Program (Social + Esteem) 

Rewarding your employees for great work will not only incentivize them to perform well, but it will make them feel valued — something that’s imperative to retaining great employees.

Your rewards and recognition program should follow a system, one which completely avoids the possibility of “picking favorites” or glancing over someone’s accomplishment. What will be the measure to which you decide what deserves rewards? A certain amount of good customer feedback? X amount of shifts in a row of not being late to work? Pick specifics to help with this.

Then, decide what your rewards are going to be. And remember, not all of your rewards have to be money-related. Gifting out plaques or trophies to put in their work spaces means a lot, too.

Employees who feel they’re truly appreciated won’t feel the inkling to look for opportunity elsewhere. Why would they? Show tangible gratitude for those who help your company thrive.

Retention can seem tricky, and as you can see, the topic is nuanced and in-depth. But cater to your employees’ hierarchy of needs with the right strategies, and watch your retention rates rise.

To speak with a company who has proven results in increasing retention rates (by up to 30%) among businesses with predominantly hourly workers, contact PayActiv today. We’re ready with a socially-responsible, holistic financial wellness program for your company and employees.

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